Madam Speaker, I am pleased to take part in this debate that was made possible by the motion brought forward by my friend and colleague from the Bloc Quebecois, the member for Joliette.
Since 1994, the Bloc Quebecois has been speaking out against those tax treaties that should not exist and not those that make sense. I was listening earlier to the minister responsible for the Canada Customs and Revenue Agency who was saying that the purpose was to avoid double taxation of profits, capital gains, etc.
We agree, but that is not what this is about. There is no problem in signing a tax agreement with a country that has essentially the same taxation level as Canada. We understand that profits made by a foreign subsidiary of a Canadian company that are taxed at a reasonable rate in the other country should not be taxed again in Canada.
Everyone understands that, but it is not where the problem lies. Where things get ridiculous, dangerous and bad for the taxpayers of Quebec and Canada is when treaties are signed with countries that are considered tax havens and have tax rates that are either non-existent or ridiculously low, for example: 2.5% or a set amount of $350 annually regardless of the individual's or company's income, as is the case in LIberia for instance. Then there is a problem.
Tax havens are a problem. We in the Bloc Quebecois are not the only ones to acknowledge this; the OECD does as well. The havens listed by it are home to about 1.2% of the world's population, yet 26% of the world's capital is found there. A population of 1.2%, yet 26% of the world's capital, attracted by harmful taxation practices that have been denounced by the international community.
In addition, 31% of the profits of multinationals are hidden in what are termed “offshore accounts”. These are accounts located in financial institutions, often branches of Canadian banks, that are located in countries considered to be tax havens.
Then there is all the secrecy surrounding how these profits are deposited. One-third of all world multinationals' profits are in such accounts. How these profits are deposited and by whom is shrouded in secrecy. The depositors are often numbered companies whose identity is known only to the institutions themselves. There is a lack of transparency surrounding these tax havens which we have been speaking out about since 1994, and others, particularly the OECD, since 1998.
One-third of the wealth of the world's wealthiest families is also in secret accounts in tax haven countries. Can you imagine what this amounts to? Some $6,000 billion. In other words, $6,000 billion in secret accounts, sheltered from taxes, has been deposited by the wealthiest families in the world, including some Canadian families—one of which we know was able to take advantage of an advance decision by Finance Canada some years ago in order to transfer two $2 billion dollar trust funds, first of all to the U.S. and then later to tax haven countries—all without paying a cent in taxes.
As mentioned before, the motion is aimed at Barbados but there are many other tax havens. There are still around 50 of them in spite of a change in their definition, and I will get back to that later on.
Direct investments in Barbados by Canadians total $23.3 billion. This is more than our direct investments in Japan, France and Mexico put together. This is really incredible. A country of 270,000 inhabitants has become some kind of big bank for the richest Canadian investors who want to avoid Canadian taxation and keep secret their financial transactions as well as transactions among subsidiaries of Canadian corporations.
Often these foreign subsidiaries, in countries considered tax havens, are what is commonly called fronts, that is empty shells with a mailing address, an office, a chair and a telephone—quite often there is not even a desk—to conduct transactions, strategies as they are called, that will benefit major Canadian corporations by allowing them to avoid paying a lot of taxes, especially to Revenue Canada.
Earlier somebody said that the tax base in Canada and Quebec was being threatened by the existence of tax havens.
The Auditor General pointed it out recently, but over the past 10 years auditors generals have consistently pointed it out and warned the government about the erosion of the tax base.
However, that is not the only problem associated with tax havens. There are others which are not so obvious. However, if one digs a bit deeper one realizes that the cause of many a woe can be found in tax havens. I will give a few examples.
In 1997-98, one of the world's worst monetary crises happened. It started in Asia. I think everybody remembers it. The Canadian dollar was no longer worth the paper it was printed on. The international monetary system was shaken to its roots.
How did it start? Very simply. A big Japanese bank, Daiwa, as well as Yamaichi Securities, at some point had dealings with a corporation using secret accounts in tax havens to hide losses on the currency market.
When the word got out, the whole system was shaken and not only Daiwa and the other Japanese company suffered, but also all of Asia, that is Thailand, Laos and Cambodia. Everything had stopped and there was a general recession that lasted almost a year and a half because of wrongdoing by two Japanese companies in the banking and financial sector.
There was a domino effect all the way to Brazil and here. The Canadian dollar was affected and was worth about 64 cents. This caused the loss of millions of jobs.
There was the Enron scandal. The same thing happened. To show an incredible bottom line, the company was hiding losses, was hiding bad investments.
How can one do this? By opening branches in countries that are considered tax havens and by hiding these losses in these branches that are empty shells. At some point, when the cat gets out of the bag, when the system is shaken enough, millions of jobs are lost and economic and financial activity is shaken. Not only the company itself, but the whole financial system suffers.
With regard to the market crash, my colleague from Trois-Rivières was telling me about pensioners. The Enron bankruptcy did not affect only the directors. In fact, they fared well, except for some who are before the courts. Hundreds of millions of dollars were lost in pension funds, precisely because a company used a tax haven, used schemes and hid its real financial situation. This shook the entire financial system.
Once again, it was the employees and pensioners who suffered from the bad decisions, from these schemes associated with tax havens. This is a serious issue. This cannot be taken lightly, one cannot be irresponsible, as we heard this morning.
The bank crash that occurred in Russia in 1998 had a similar impact. The world system was shaken up. Why, do you think? Because some crooked businessmen in Russia opened branches in countries known to be tax havens, branches that consisted of nothing more than a postal address, a chair and a desk. Money was lent to this business that only had a chair and a desk and not even a telephone. Hundreds of millions if not billions of dollars were loaned. And then suddenly the business that had set up shop in a tax haven went bankrupt and the Russian banking system was badly shaken up. What people were not told is that the branch was owned by crooked businessmen who were loaning money to a shell company set up in a tax haven, with all the attendant secrecy and lack of transparency. That is what tax havens are all about.
Let us talk about developing countries. Because of the existence of tax havens, to attract investors, developing countries now have to apply the exact same tax rates that are already in effect in better tax havens, Barbados, for instance, where the rate stands between 0 and 2.5%.
Oxfam International made an estimate of the losses incurred in Africa alone. Because of tax havens, Africa is losing $50 billion a year.
Just for the fun of it, I compared this figure to what is needed for international assistance. It is six times what developing countries, especially in Africa, need to provide elementary education programs. Six times.
It is three times the amount Africa would need to deliver basic health care to children and other people. If we take this lightly, I do not understand what we are doing here. If we claim we are protecting the public interest, we certainly have a problem with our definition of public interest.
Tax havens exist because we encourage them. We certainly do not discourage them. As we speak, there are 1,700 branches of Canadian companies in Barbados alone. This means 1,700 branches of Canadian companies which are encouraging such a system. This system deals not only with legal money, but also with the money of drug traffickers. In tax havens, it is hard to distinguish between legal money and dirty money. We have known that for a long time.
We have here a system shrouded in complete secrecy, with a total lack of transparency. These companies are just empty shells with no substance. This system could not exist without support. There are 1,700 branches of Canadian companies in Barbados alone.
What about Canadian banks? Since 1994, I have been asking Canadian bankers why they have 50 branches in the Caribbean. Just for the fun of having branches or flying the Canadian flag? Certainly not. They have branches there because they stand to benefit from it. Maybe people do not realize this, but since it is impossible to tell legal money from dirty money, these branches of Canadian banks are in a situation where they can use dirty money, launder it and put it back into the official and legal monetary circuit.
We should get that into our head. This is not a minor issue, and Canada is encouraging the existence of tax havens with these branches of banks and other Canadian companies.
That is not the only way Canada encourages the existence of tax havens. The Department of Foreign Affairs has a Web site where it invites Canadian investors to invest in tax havens. Imagine that. It invites investors to avoid taxes. And in the meantime, cuts are being made right and left. The former finance minster and future Prime Minister, the hon. member for LaSalle—Émard—we will get back to him in a few minutes—made cuts in federal-provincial transfers for education, health and social assistance. In the meantime, things like this were allowed to go on.
Speaking of Canada, besides the Web site of the foreign affairs department, there is a hypocritical attitude toward these tax havens.
I would like to quote what the former finance minister said in 1994. I was there and I heard him. This is what he said:
Certain Canadian corporations are not paying an appropriate level of tax. Accordingly, we are taking measures to prevent companies from using foreign affiliates to avoid paying Canadian taxes which are otherwise due. We are taking steps to ensure that the income of financial institutions is measured appropriately for tax purposes.
End of quote from the former finance minster and future Prime Minister, the hon. member for LaSalle—Émard.
In the meantime, he allowed the foreign affairs department to encourage tax evasion. He refused to terminate the tax convention with Barbados, although the OECD asked him to. In fact, not only has the Bloc Quebecois been asking since 1994 for the termination of the tax convention with Barbados; so has the OECD. He refused.
I remember that the hon. member for LaSalle—Émard, future prime minister and former finance minster was in Toronto with OAS finance ministers a few years ago. I asked him publicly, since they were discussing taxation practices that were harmful internationally, if he would terminate the tax convention with Barbados. He refused.
There has also been hypocrisy on the part of the government, on the part of the former finance minister and future Prime Minister, the hon. member for LaSalle—Émard. Do you know why? Because he was acting as the judge in his own case. He owns, directly or indirectly, 13 subsidiaries operating in Barbados. Why would he want to shoot himself in the foot? Why would he terminate the present situation, the tax convention with Barbados, when he benefits personally from the existence of this system?
One more point, my final one, about the hon. member for LaSalle—Émard: need I remind the House that the OECD not only listed 35 countries as tax havens, it also listed 47 other countries as having tax practices similar to those of tax havens? Canada was one of these countries.
For certain sectors. Canada's practices are considered to be similar to those of tax havens. Does anyone know what sector was singled out by the OECD? It was international shipping, the very activity in which the hon. member for LaSalle—Émard and future Prime Minister owns companies that he is supposed to transfer to his children in the next few weeks.
We cannot be naive either. When the former finance minister, the hon. member for LaSalle—Émard, says that he is transferring his companies to his children, they will remain in the family. We will not blindly believe that he will not have any influence or that he will not have an interest, if a policy relates to international shipping or any other tax matter related to shipping.
I want the hon. member for LaSalle—Émard and future Prime Minister to make public the bill of sale or transfer deed to his sons. Although it was a private transaction, it is in the public's interest to know the possible ties between the hon. member for LaSalle—Émard, future Prime Minister, and Canada Steamship Lines. He did not want to make it public on the grounds that it was private. I think that it is in the public's interest to know how this company was transferred to his sons and what ties might still exist between the future Prime Minister and Canada Steamship Lines.
Yesterday we received an amendment from the NDP about the next ethics counsellor, who will be accountable to Parliament. If the future Prime Minister does not want the transfer of Canada Steamship Line to his sons to be made public, it might be a good idea to formally ask the next ethics counsellor, who will be accountable to Parliament, to make all the documents related to these transfers public.
Rest assured that my colleagues and I are going to ask the next ethics counsellor to monitor the future Prime Minister very closely in his decisions and his involvement in discussions that could directly or indirectly affect international shipping companies.
Again, we implore the government to stop turning a blind eye to the existence of tax havens and to terminate the tax treaty with Barbados. We have been asking this for years, but now it is urgent. Corporate taxation also needs to be changed to plug all the loopholes that have been detected over the years and to keep Canada's tax base intact.
Like my hon. colleagues from Joliette and Drummond, I believe it would be a great idea if, as part of the negotiation of the Free Trade Area of the Americas, all the countries involved condemned all harmful fiscal practices in either developed or developing countries. The time has come to stop turning a blind eye to tax havens and their huge impact on the economy and the tax base, as taxpayers have to make up the shortfall in the tax base year after year.
It is incredible that, while he has cut $45 billion in transfers to the provinces for education, health and social assistance since taking office, the former Minister of Finance and future Prime Minister has turned a blind eye to such tax conventions and refused to terminate them, and also to conduct a special investigation into family trusts.
That is another matter. He has allowed the wealthiest family in Canada to transfer two family trusts totalling $2 billion without paying any income tax. How many more of these trusts are there? How many times did the government turn a blind eye to similar situations, which jeopardize Canada's tax base?
We must urge the government to act now. I also believe that Canada should assume international leadership to put an end to such international practices as tax havens.
