Debates of June 16th, 2023

The House proceeded to the consideration of Bill C-42, An Act to amend the Canada Business Corporations Act and to make consequential and related amendments to other Acts, as reported (with amendments) from the committee.

Speaker's Ruling

[The Deputy Speaker, Conservative, Chris d'Entremont]

There is one motion in amendment standing on the Notice Paper for the report stage of Bill C-42. Motion No. 1 will be debated and voted upon.

Motions in Amendment

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

moved:

That Bill C-42 be amended by deleting the long title.

Mr. Speaker, it is a pleasure to rise on Bill C-42, an act to amend the Canada Business Corporations Act and to make consequential and related amendments to other acts. I outlined the amendment because we really did not study or work on too many other acts.

Earlier last week, when we finally had time to debate this bill and study it extensively at committee, it was very unfortunate that we had our committee witnesses appear the hour before we were to discuss amendments and go through clause-by-clause of the bill. There were some aspects of the bill that could have been improved had we had more time.

An example is the threshold for significant control. While the government repeatedly claimed that 25% is the international standard, witnesses made clear that it was only a guideline and that Canada could be a leader by reducing it. James Cohen, executive director of Transparency International, noted:

I don't think, for one, lowering the threshold from 25% to 10% and a risk-based approach are mutually exclusive. I think they actually go hand in hand. I would note that the 25% isn't so much a standard as it was an initial global recommendation that everyone just kind of grabbed on to.

Furthermore, when asked if a lower threshold would create unnecessary administrative complications, Superintendent Denis Beaudoin, director of financial crime for the RCMP, stated, “The RCMP standpoint is that the more names and more information, the better. As we're trying to make links in a criminal investigation, it certainly can help.” Both Conservative and NDP members of the committee tabled amendments to reduce the threshold for significant control from 25% to 10%. However, they were blocked by the Liberal and Bloc Québécois members.

The next aspect of the bill that could have been improved had we had more time to go through the amendments and hear from expert testimony relates to searchability. The Conservatives tabled two amendments to improve the searchability of the public registry, which were both raised by Transparency International in its submission. The first would have required that the jurisdiction of residence for tax purposes and the name of the corporation be included for each individual listed on the registry. The second would have added specific language to the bill requiring that the registry be made available to the public in a searchable format. Other good-faith amendments that were rejected included the inclusion of real estate in Bill C-42 and interoperability measures that could have improved the ability to work with the provinces and territories to have all the data that our law enforcement needs to go after white-collar crimes.

The next clause that was deleted that I think could have improved the bill related to law enforcement access. This amendment would have added specific language to the bill to ensure that law enforcement and other investigative bodies like FINTRAC could access information from the director rather than having to go to corporations individually. It also would have removed a reference to prescribed circumstances in relation to exceptions, ensuring that only minors are automatically exempted from having their information disclosed and that all others must apply for an exemption and prove that it is necessary.

There was a good-faith amendment brought forward by the Conservatives and recommended by Transparency International related to post boxes. This amendment would have barred individuals from listing a post office box as their address to be made in the public registry. Transparency International and the End Snow-Washing campaign requested that this be included in the bill. Ministry staff assured members that disallowing the use of post boxes is already standard practice at Corporations Canada and that including this language in the bill would be unnecessary. However, that analysis did not account for fact that the provincial registries may have different guidelines. If we are to truly seek interoperability and go after white-collar crime, we have to be more open to explicit language in legislation like this to give law enforcement the tools it needs and to close as many loopholes as possible.

Another good-faith CPC amendment was related to penalties on provincially registered corporations. This amendment would have changed the definition of a corporation in the context of offences to include provincially regulated corporations. This was important to ensure that when we reach a stage of interoperability with all registries, either provincial or federal, all people who are in contravention of the bill, and hopefully future law, are subject to the same penalties and convictions under the Criminal Code of Canada. I will note that the Conservatives, in good faith, did support an amendment that we also tabled to increase the fines for people committing an offence under the corporations act and it was supported. It was one positive aspect of the process at committee.

However, overall, while enemy cannot be the perfect of the good, I think the bill could have used just a few more meetings to hear from witnesses to get it at a stage where we could be really assured that we made the necessary and appropriate amendments. I say that because there was a good-faith commitment from all parties on this legislation to move quickly. I will repeat that it is not good parliamentary practice to have serious witnesses appear an hour before we are doing clause-by-clause, especially when they are bringing forward substantive amendments and have very little time to present.

I will go over some of the positions of the Canadian Bar Association, which had concerns with public access to the beneficial ownership registry and ensuring that Bill C-42 complies with the Canadian Charter of Rights and Freedoms. It noted this in a letter to me:

Individuals have legitimate personal and business reasons for not publicly disclosing sensitive personal information of beneficial owners. Canada should be mindful that businesses will look carefully at the requirement to make information public and determine how and in which jurisdiction they want to structure their corporations.

Public disclosure of additional corporate information may deter corruption and money laundering, and frustrate the efforts of fraudsters to use sham corporate vehicles for criminal purposes. However, it may also increase identity theft...which could undermine the anti-fraud rationale of the registry.

I think we needed to hear more from the Canadian Bar Association to get the balance between personal information being disclosed publicly and the need for law enforcement to have the necessary tools to do its job effectively. Indeed, the letter from the Canadian Bar Association said that a key aspect of this bill is balancing public interests and privacy rights. It noted:

In 2022, the Court of Justice of the European Union (CJEU) examined an anti-money-laundering directive...establishing a Register of Beneficial Ownership where some information on the beneficial owners was accessible to the general public. The CJEU held that the directive was invalid because the public’s access to information on beneficial ownership constituted a serious interference with the fundamental rights to respect for private life and to the protection of personal data.

Although witnesses did appear before committee, they had very limited time to bring forward all of their amendments. In fact, we only received amendments from Publish What You Pay Canada, Transparency International and Canadians for Tax Fairness on June 8. They outlined a number of really key amendments, some of which we were able to get on the floor at the very last minute. However, again, had there been a week in between hearing from serious witnesses and going through the amendment process in clause-by-clause, the bill could have been a bit better.

For example, Transparency International outlined the verification of identity of a significant individual. It recommended for “the Government of Canada to review Division Two and consider amendments requiring corporations to provide identity documents to the registrar upon request for the specific purpose of verification.” Transparency International outlined the need to improve intergovernmental corporations, which was a big aspect of the work we did to study the legislation. It also pointed out, especially in the context of a place like British Columbia, where we see a lot of foreign investment or at least a lot foreign money entering our real estate market and local businesses, that more needed to be done to ensure that the country of residence, the name of a corporation and valid government ID be part of these registries moving forward. As I outlined earlier, it mentioned that post office boxes should be included and should not be used as a place to do business in Canada.

Overall, we did get some good work done on this bill, but a lot more could have been done.

[Chandra Arya, Liberal, Nepean, ON]

Madam Speaker, corporations, joint stock companies, were conceived almost 150 years back as a means for individuals to pool their resources, de-risk their investments and channel their resources for commercial gains. That is the fundamental reason why these corporations exist. It is not the right of any individual, Canadian or someone outside of Canada, to form a corporation. They do not have this right. They can form a corporation, but the details are not made public.

I would like to ask the hon. member whether he agrees that, because it is a privilege offered by the government to individuals to form corporations, the fundamental details of the names of the shareholders and their citizenships should necessarily be made public.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Madam Speaker, I actually raised the hon. member for Nepean's testimony from the debate we had at second reading during the amendment process. We should do more to ensure that valid government identification is included in the registry, maybe not on the front end that the public can access, but making sure that our law enforcement agents can in fact review that information in a timely manner.

Indeed, citizenship and current address should be included as a part of these measures as well. I will be encouraging members of the other chamber to look more closely at those aspects of this legislation to ensure that we get it right.

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

Madam Speaker, I thank my hon. colleague for his speech.

In the United States, the U.S. Congress is currently introducing the same kind of registry. Rumour has it that some elected officials oppose the idea because revealing the source of donations would hurt the financing of their permanent election campaigns. Does my hon. colleague think that this kind of approach could be considered in the House?

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Madam Speaker, if we are to compare the way we take information for someone who donates to a political campaign in Canada versus the United States, I think we can rest assured that in Canada, we have a maximum donation of $1,700 for an individual. No corporations are allowed to donate in Canada, and we have a public registry that is updated on a regular basis by Elections Canada.

I think, in Canada, we have done a very good job of creating a level of transparency so that everyone in our country knows who donates to which political party. Indeed, in America, the arrangement between corporations and donating to elected officials is very different. I am very proud of the Canadian system we have today.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Madam Speaker, the thing that stood out to me most about the member's speech was when he said that we should not let the perfect be the enemy of the good in this case. I take his points about the process. I think there are ways that this model can be improved upon; I am also cognizant of the fact that, in order for this registry to be implemented by the beginning of 2024, I believe the legislation has to pass before the end of the month. This will give officials time to implement the will of Parliament on this matter.

I know that there is a sense of urgency because of Russia's illegal invasion of Ukraine and the extent to which folks think that Russian oligarchs have assets in Canada. A public beneficial ownership registry would be an important tool in pursuing those folks.

In the opinion of the member, should we get this legislation passed by the end of the month in order to allow for this registry to be put in place in a timely way that allows Canada to pursue Russian oligarchs who are hiding assets in Canada?

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Madam Speaker, indeed, the member raised some important points. I do not believe that any of the security officials who appeared at committee, in their limited time, referenced a correlation between this legislation and the invasion by Russia into Ukraine.

I think what is important in this registry, as the lawyers from the Canadian Bar Association outlined in their information to the committee, is that we balance the Charter of Rights and Freedoms right to protection of personal information with the need for a public registry to ensure that we end snow washing in Canada. Indeed, that is a very fine balance. That is why we needed just a few more meetings to get this legislation right and hear a bit more testimony. A couple of meetings, even if we were meeting next week on this legislation, would have been enough to get to where we needed to be.

For that reason, because we were not able to get as far as we needed, we are going to have to push for amendments in the Senate, which is actually going to slow the process down more. We are better off to do our work very well the first time and not the—

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Liberal, Alexandra Mendes]

Resuming debate, the hon. member for West Vancouver—Sunshine Coast—Sea to Sky Country.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Madam Speaker, I rise today to offer a few thoughts on Bill C-42, which proposes amendments to the Canada Business Corporations Act, or CBCA, and would make consequential changes to other statutes to create a federal beneficial ownership registry. This registry would be, arguably, the most important tool we could utilize to better detect, deter and prosecute money laundering, tax evasion, fraud and terrorist-financing activities.

First of all, I want to congratulate all members of the Standing Committee on Industry and Technology for their hard work. They studied a bill with more than 20 clauses, dealing with a highly complex subject matter, and heard from numerous stakeholders who represent a spectrum of views.

Among other factors, the committee heard that the interoperability of the registry is a key concern and is, in fact, a key ingredient to the success of a pan-Canadian beneficial ownership registry. Certain witnesses appearing before committee emphasized the need to ensure adequate alignment, both domestically and internationally. The need for this is obvious, given the transnational nature of organized crime and the complexity and sophistication with which actors can conceal the true owners of different assets. We need to be able to work together to counter this.

Interoperability has many dimensions, but it generally means that Canada not only respects international best practices on thresholds and uses the best available data standard but is also similarly aligned with domestic best practices. Thus, provinces are enticed to join a pan-Canadian registry and information can be shared seamlessly to trace illicit activities across jurisdictions. That is why Canada has adopted the beneficial ownership open data standard, which is an internationally accepted open standard for modelling and publishing information on the beneficial ownership and control of companies. It is used for collecting, sharing and using data on beneficial ownership. Canada's use of this standard would ensure that our registry could communicate and speak using the same technical language as beneficial ownership registries around the world do, as well as communicating with our provincial and territorial partners.

The standard would also mandate that corporations provide information about individuals who have significant ownership stakes and control in any corporation, thereby empowering law enforcement, the CRA, banks, journalists and the general public to accurately ascertain the true owners of any given company. This will help prevent criminals from using anonymous, numbered corporations, or shell companies, which are sometimes spread across multiple jurisdictions as a shield to conceal the true owners of companies.

Furthermore, I want to highlight the work of the committee in increasing the maximum penalties for those found to have failed to comply with the legislation, with fines now up to $1 million. This will ensure that there is a sufficient deterrent effect for individuals frustrating the important purpose of the legislation.

The provinces and territories have a major role to play here, because the vast majority of companies are in fact incorporated provincially. That is why I am pleased to see my home province of British Columbia taking a leadership role in response to widespread allegations of money laundering in the province. B.C. has tabled legislation to create its own beneficial ownership registry for corporations, and it has already created a beneficial land ownership registry, which is now in effect.

It is easy to see why action is important. A 2018 report estimated that money laundering has played a role in increasing housing prices by approximately 5% in British Columbia. The lack of knowledge regarding the true owners of over half of the top 100 most-expensive properties in B.C. not only worsens the problem of housing affordability but also raises further concerns about potential tax evasion related to the treatment of principal residences. Furthermore, clear ties have been made between money laundering and the devastating health crisis we are facing in B.C., the opioid epidemic, where illicit funds garnered from the sale of fentanyl and other illegal drugs are laundered through real estate and other opaque means, contributing to the problem.

That is why, in addition to Canada's adoption of the beneficial ownership open data standard, the federal government has worked and continues to work alongside its provincial and territorial counterparts to continue to move the needle ahead on ensuring beneficial ownership transparency in Canada. This collaboration began at the officials level in 2016 and was formalized in a 2017 agreement among federal, provincial and territorial finance ministers. They agreed, in principle, to pursue legislative amendments to their respective corporate statutes that would require corporations to hold accurate and up-to-date information on beneficial owners, as well as to eliminate the use of bearer shares.

In 2019, finance ministers further agreed to “cooperate on initiating consultations on making beneficial ownership information more transparent through initiatives such as aligning access through public registries, while respecting jurisdictional responsibilities with respect to corporations.” The ongoing collaboration has resulted in, among other things, the majority of the provinces making amendments to their corporate statutes to create and maintain a beneficial ownership registry of their individuals with significant control. These amendments largely emulated the 2019 legislative amendments made to the CBCA. This means that, for most businesses operating in Canada, there will be information available on their beneficial owners.

Our ongoing collaboration with the provinces has also culminated in the establishment of a common platform called the multi-jurisdictional registry access service, or MRAS for short. MRAS is a common front-end portal that provides access to all the corporate registries in the country. It was a project adopted many years ago among the provinces, the territories and the federal government, and it represents one of the options to build on in creating a pan-Canadian registry.

Our efforts to harmonize federal and provincial beneficial ownership regimes are an ongoing initiative. To illustrate this, it is notable that, on June 5, Minister Champagne and Deputy Prime Minister Freeland sent a joint letter to their respective provincial and territorial ministerial counterparts, asking them to once again join the federal government's effort to create a pan-Canadian beneficial ownership registry and seeking specifically to understand each—

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Liberal, Alexandra Mendes]

I must interrupt the member.

The hon. member for Joliette is rising on a point of order.

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

Madam Speaker, with all due respect, it is the practice of the House that we do not refer to ministers by name but by their title of office.

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Liberal, Alexandra Mendes]

I completely agree. I was distracted. The hon. member is quite right; we do not use the names of members.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Madam Speaker, the letter was seeking to specifically understand each jurisdiction's particular needs and any supports required to facilitate their participation in a pan-Canadian system.

During the committee hearings, requests were heard to lower the ownership threshold to disclosure from 25% to 10%. First, it is important to point out that the decision to adopt a 25% threshold was made in 2018, and it was approved by Parliament in 2019 in Bill C-86.

With that said, the government does not support lowering the ownership threshold from 25% to 10%, because doing so could introduce significant interoperability issues. The 25% threshold makes the most sense for the following reasons: It is in line with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, Canada's anti-money laundering and anti-terrorism financing legislation. It also aligns with the beneficial ownership thresholds put in place by Canadian provinces, including Quebec and British Columbia. It is also in line with the ownership threshold adopted in all major jurisdictions in the world, including the U.S., the U.K., the European Union and Japan. Finally, it is compliant with the G20 and the norms set by the G20's Financial Action Task Force.

It should be emphasized that lowering the ownership threshold is not necessary to uncover significant control. Individuals who have a right to or actually exercise significant influence or control over a company are still required to be registered, even if they own less than 25% of the shares.

To ensure the effectiveness of the new registry, it is crucial for Canada to stay in line with domestic and international norms. Otherwise, the data it collects would not be interoperable or comparable; this would create both a significant burden on businesses and a significant challenge in ensuring compliance. Lowering the ownership threshold from 25% to 10% will take us out of alignment with best practices, both domestically and internationally; therefore, it is not recommended by the government.

The lack of beneficial ownership transparency is impairing Canada's ability to combat serious financial crimes, such as fraud, money laundering and tax evasion. It also limits our capacity to enforce domestic and international sanctions and to effectively trace and freeze financial assets. Finally, it is impacting the trust of Canadians and foreign investors in our marketplace.

Our inability to quickly and quietly identify a company's beneficial owner delays criminal investigations; denies law enforcement leads to potential suspects, witnesses and evidence; and impairs the identification and seizure of suspected proceeds of crime. It also reduces the ability of private businesses to protect themselves.

It is clear that the registry proposed by this bill and the interoperability measures that form part of the regime would significantly improve Canada's ability to fight financial crime. It would help public authorities verify owners across corporate layers, help businesses better validate the identity of their trading partners and render more difficult the use of corporations for illicit activities.

Future areas that should be examined to improve our ability to ascertain the beneficial owners of assets include bringing in new requirements for foreign companies doing business in Canada to disclose their beneficial owners, as well as for the Government of Canada to play a coordinating role in assisting the provinces and territories to establish a pan-Canadian land ownership registry. This registry would be able to work in concert with the corporate beneficial ownership registry. It would dovetail the important legislative changes to improve our ability to tackle financial crime that were announced in this year's budget implementation act.

A forthcoming review of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act will surely identify further measures to take. I hope all members of this House will join me in supporting this important bill's passage so that we can continue to improve our ability to protect Canada from financial crime and the illicit activities that it supports.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Madam Speaker, Mission—Matsqui—Fraser Canyon is Canada's number one riding.

I will just note that, during the witness testimony, we heard from Transparency International and the RCMP that the standard practice the government keeps talking about was not actually a standard practice; it was just a norm that became adopted.

I fail to see why the government sees such an impediment to decreasing the threshold, as if it were going to suddenly stop us from doing more work. The RCMP wants it. The leading experts in Canada on money laundering think lowering the threshold is a good idea. As well, in conjunction with lowering the threshold, more businesses, under the federal corporations act, would be included. I should point out that we did not even have a chance to discuss the stacking of corporations in conjunction with the change in thresholds as well.

I do not know why the government is so stuck on not doing this. The RCMP thought it would be a good—

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Liberal, Alexandra Mendes]

The hon. member for West Vancouver—Sunshine Coast—Sea to Sky Country.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Madam Speaker, I would say my riding is the most beautiful riding in the country.

I talked quite a bit about the rationale for keeping the disclosure threshold at 25%. It is important for it to be seamless in order to operate and communicate with all jurisdictions around the world that are implementing this system. Making sure we are consistent would be very helpful and seamless for the sharing of that information.

I think there are always opportunities to see if this might be changed down the road. I know some jurisdictions are actually now thinking of lowering the threshold. If that were to take place around the world, then I think there would be good rationale for us to emulate that; however, I think, as it stands right now, this is the standard, and it is important for us to be consistent.

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

Madam Speaker, first of all, I invite my two hon. colleagues to come and visit the riding of Joliette. I am certain they will change their minds about how they rank the ridings by beauty.

I would like to congratulate my colleague on such a wonderful, informative speech. He also pointed out that this government's process of working with the provinces has been beyond reproach, and I am grateful for that, as it seems quite rare these days.

In my opinion, this is really a step in the right direction. However, we are going to have to go further. For example, we need to know the identity of the companies' real beneficiaries, who could be in tax havens. What does my colleague think about that?

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Madam Speaker, I thank my colleague from Joliette for his question. I look forward to seeing his riding as well.

That is a good question. We need to be able to determine the identity of the true owners of companies that come from other countries. As I said in my speech, this is a subject that could be researched in anticipation of future amendments to the act. I think this could present problems, because criminals are starting to use very sophisticated methods and they operate in several countries. We need to find ways to fight them.

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

Madam Speaker, there is no debate that I do live in the most beautiful riding in the country.

To my colleague, who is also from British Columbia, I say that there was a really important study done by the Standing Committee on Fisheries and Oceans, called “Sharing Risks and Benefits”, and it was by commercial fishers, to ensure that their needs are being met, because we have a broken commercial fishing industry in Canada. On the east coast, we have a local ownership model. On the west coast, we have a concentration of commercial interests.

One of the top asks of commercial fishers in this study was to ensure that we know who owns the quota in our public fishery.

Can my colleague assure that commercial fishers in Canada would know, through this legislation, who owns the quota, so we can better manage our fisheries and ensure that the concentration of wealth actually ends up in the hands of those fishing—

[The Assistant Deputy Speaker (Mrs. Alexandra Mendès), Liberal, Alexandra Mendes]

The hon. member for West Vancouver—Sunshine Coast—Sea to Sky Country.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Madam Speaker, I want to wish my hon. colleague from Courtenay-Alberni well. I know there have been some serious issues with forest fires impacting transportation throughout his riding. I wish him the best, and it is good to see him here.

I very much agree with the premise of his question. The fact that we do not know how the quota is allocated is something of significant concern. I certainly support looking into what it might look like to have that quota allocated to the fishermen themselves, not to companies that are perhaps reselling that quota.

Now that we have created this beneficial ownership registry, it would be interesting to see how that might be able to be expanded to the owners of the quota as well, so we can better understand—

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

Madam Speaker, as previously stated, the Bloc Québécois supports Bill C-42. This bill will reveal who is really behind shell corporations. The bill will make it easier to fight tax evasion, money laundering and the financing of illegal activities.

Furthermore, the process that resulted in this legislation is beyond reproach and respects the jurisdictions and autonomy of Quebec and the provinces. This approach is becoming increasingly rare in Ottawa, and we applaud it in this case. Finally, I would like to remind the House that Quebec already has its own registry.

However, for anyone who believes in tax fairness, surely it is high time we cracked down on tax havens. As members know, by using them, the ultra-wealthy are evading taxes like never before, and so are the big banks, multinationals and web giants. These companies justify their actions on the grounds that their schemes are legal, even though their greed is completely immoral.

I would now like to refer to two economists, Emmanuel Saez and Gabriel Zucman, who clearly illustrate the method in their book The Triumph of Injustice.

First, they explain that the legal framework for multinationals has changed little since they were first developed in the 1920s. Subsidiaries of the same multinational are treated as autonomous entities. For example, “Apple Ireland must be considered for tax purposes as a firm of its own, distinct from Apple USA.” Since Ireland's tax rate is half that of the United States, it is in the multinational's interest to transfer its profits there to pay half the tax.

In theory, subsidiaries must exchange goods and services at market value, on an arm's-length basis, as if the entities were independent of each other. In practice, however, they have considerable leeway to shift profits to tax havens.

The principle, which has barely changed, was developed in the 1990s by tax optimization consultancies. It involves the sale between subsidiaries of assets that have no market price, such as logos, brands, management services or financial services.

The economists give some examples:

What's the price of Apple's logo? It's impossible to know: This logo has never been sold in any market. What's the price of Nike's iconic “swoosh”? What's the price of Google's search and advertisement technology? Since these logos and trademarks and patents are never traded externally, firms can pick whatever price suits them.

The firms sell all-in services, that is, a creative intragroup transaction accompanied by a certified “correct” transfer price. Saez and Zucman explain what this means:

Thanks to the proliferation of intragroup transactions conducted at doctored prices, high profits [in the hundreds of billions of dollars] end up being recorded in subsidiaries where tax rates are low, and low profits in places where they are high.

The economists estimate that $800 billion U.S. in multinationals' profits is transferred to tax havens. That represents 40% of their global profits and 60% of the profits of U.S. multinationals.

Variations on these schemes are made available throughout the world by the Big Four accounting firms, Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers.

It is always the same thing. Here are two examples provided by the authors:

In 2003, a year before it was listed as a public company in August 2004, Google sold its search and advertising technology to its own “Google Holdings,” a subsidiary incorporated in Ireland but for Irish tax purposes a tax resident of Bermuda, an island in the Atlantic where its “mind and management” are supposedly located.

Transfer pricing was kept secret, but it was certainly low. Otherwise, it would have had to be declared to the Securities and Exchange Commission. Saez and Zucman estimate the figure at $700 million U.S., tops, when the same algorithms have, for example, enabled Google Holdings to report $22.7 billion U.S. for doing business in Bermuda in 2017 alone. That is 30 times more for a single year. Talk about the goose that lays the golden eggs.

Economists have pointed out that, in Asia, Singapore is the location used instead of Bermuda. Its tax rate for multinationals is also nil, or zero.

Here is the second example. In 2004, Skype, which was founded by a Swede and a Dane, transferred the better part of its technology to its Irish subsidiary. However, thanks to LuxLeaks, the leak of confidential documents from PricewaterhouseCoopers in 2014, we know the details of that transaction. The cost of the technology transfer was estimated at 25,000 euros, which is scandalous, given that Skype was bought by eBay a year later in 2005 for $2.6 billion U.S., over 100,000 times the price of the transfer. Saez and Zucman explain that corporate tax dodging schemes are quite simple. They said the following:

At its core, it involves manipulating the price of intragroup transactions in goods (like iMacs), services (as when a US firm buys “management advice” from an affiliated party in Switzerland), assets (such as Google selling its search and advertisement technology to its Bermuda subsidiary), or loans (as happened during the Netherlands Antilles frenzy of the early 1980s).

In that regard, the Netherlands Antilles frenzy was a sort of dress rehearsal for the use of tax havens. It started in the late 1970s and was banned in the late 1980s. This new corporate tax evasion industry fits within the context of the emergence of the neo-liberal ideology, which occurred at the same time as the boom in tax havens for individuals. Saez and Zucman illustrated that as follows, and I quote:

Here is how it worked. A US firm would set up a subsidiary on the island of Aruba, Bonaire, or Curaçao. It would then have this affiliate borrow money from a European bank at the prevailing interest rate, around 3%, and lend it back to the US parent company at a much higher interest rate, around 8%.

The difference in rates helped shift the profits from the United States to the Caribbean.

As we know, the use of tax havens really took off in the 1990s. With the fall of the Berlin Wall, neo-liberalism triumphed. The new generation of executives focused their corporate role on serving the shareholders exclusively. In the meantime, the share of profits earned overseas doubled from 15% to 30% for American multinationals.

The response from wealthy states was to lower the corporate tax rate, which did not help repatriate their profits. Between 1985 and 2018, the average corporate tax rate was halved, going from 49% to 24%. As the two economists point out, in the early 1950s, corporations paid as much in taxes as individuals. Today, with the tax cuts and the use of tax havens, this ratio has changed dramatically. Businesses contribute 10 times less than individuals. Back home, in Quebec, this imbalance has been documented extensively by Professor Lauzon.

Multinationals now reign supreme; they artificially relocate their profits to tax havens to avoid paying taxes. The profits they do not relocate are taxed at half the rate they were 30 years ago. Not to mention that they outsource their real activities to countries where the people are underpaid, allowing their profits to swell even more.

The solution to this injustice is first and foremost political. In fact, that is the pretext that multinationals use. According to their rhetoric, all of this is legal. What is more, they undertake a colossal amount of lobbying to keep it that way. Saez and Zucman take issue with that:

It's a weak defense: nothing of substance happens in Bermuda, so it stands to reason that Google has booked $22.7 billion in revenue in that island to avoid taxes, in violation of the economic substance doctrine.

The authors conclude it will take a revolution in how things are done if we want to change the game, saying, “In need of a Copernican revolution, [the OECD has] been busy refining the Ptolemaic model”.

I therefore invite the House and this government to be the revolution the world needs.

[Chandra Arya, Liberal, Nepean, ON]

Madam Speaker, my riding of Nepean has two rivers, farmland, a greenbelt and a high-tech processing and testing facility. Best of all, we have the best people in Canada, who speak 120 different languages. It is not only beautiful but it is also a mini-Canada.

These days, with the number of corporations being set up, sometimes there is no difference between tax avoidance and tax evasion. The hon. member mentioned the tax havens around the world. I want to pick his brain and get his comments on the global corporate minimum tax that is being proposed, and which would be implemented soon.