House of Commons photo

Crucial Fact

  • His favourite word was tax.

Last in Parliament March 2011, as Liberal MP for Mississauga South (Ontario)

Lost his last election, in 2011, with 37% of the vote.

Statements in the House

Tax Conventions Implementation Act, 2010 November 22nd, 2010

Mr. Speaker, I am pleased to speak to Bill S-3.

I took the time to read the debate from May 13 on this bill, at which time it was sent to the Standing Committee on Finance. I currently serve on the finance committee but did not when the bill was sent to the committee back then.

I had an opportunity to read the debate from May to see some of the substantive points and I was not surprised to see that the Parliamentary Secretary to the Minister of Finance, who spoke to lead off this debate at third reading, made the same points that he raised at second reading. That is not surprising and it indicates to me that really nothing has changed since the last time we dealt with this legislation. In fact, I believe this particular bill was up even in the last session of Parliament.

For those who are following the debate, Bill S-3 was introduced in the Senate. It is a bill that would implement conventions and protocols concluded between Canada and Colombia, Greece and Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. It is fairly long.

The summary ostensibly repeats the title of the act, but there is some more information in the summary. It says:

The treaties implemented reflect [our] efforts to expand Canada’s tax treaty network. Those treaties are generally patterned on the Model Double Taxation Convention prepared by the Organisation for Economic Co-operation and Development.

The summary repeats the two objectives: the avoidance of double taxation and the prevention of fiscal evasion.

The summary indicates that since a tax treaty contains tax rules different from the provisions in the Income Tax Act, it becomes effective only after being given precedence over domestic legislation by an act of Parliament such as this one. For each of those tax treaties to become effective, it must be ratified after the enactment of this bill.

Interestingly enough, the bill has a short title. There has been a lot of discussion about short titles in this place. People have given whole speeches about how short titles tend to represent that a bill does something that it in fact does not but it is pretty good politics to have the language out there.

As the short title, this bill may be cited as the Tax Conventions Implementation Act, 2010. It makes some sense, because we have these tax conventions with over 90 countries already and every one of them is identical in terms of their clauses.

The bill contains six clauses and the only thing different would be the name of the country. They are each included under parts to the bill. Part 1 is the Canada-Colombia convention, part 2 is Canada-Greece, and part 3 is the Canada-Turkey convention.

The bill is not long at all, and in fact, the first of the six clauses under each part is just to have another short title. For Colombia, for example, it states:

This Act may be cited as the Canada– Colombia Tax Convention Act, 2010.

Clause 2 says this act is a convention, etc.

Clause 3 says that the convention is approved and has the force of law in Canada during the period that the convention, by its terms, is in force.

Clause 4 basically says that, in terms of the provisions of this act or the convention and the provisions of any other law, the provisions of this act and the convention prevail to the extent of the inconsistency. It basically means that if there is an inconsistency between any legislation and this bill, the bill is in force to the extent that there is the inconsistency, and that is handled depending on the nature of it.

Clause 5 allows the Minister of National Revenue to make any regulations that he or she feels are necessary to carry out the convention and for giving effect to any of its provisions.

This gives me a chance to give my standard statement that when parliamentarians look at legislation, often they will find, in some of the clauses, “subject to” the regulations. I should indicate that as parliamentarians debate this at second reading, in committee, at report stage and at third reading, they still have not seen what the regulations are.

The regulations are supposed to be the details. For instance, it would say that, under the Income Tax Act, tools are deductible at a rate of 20% a year. In the regulations it would say that tools include hammers, saws, screwdrivers, et cetera. So the regulations are the details, and the provision in the bill for “tools” gives the generic.

During the debates, as I have said, we do not know what the details are. It is important to know details because we have a committee, a joint Commons-Senate committee called the Standing Joint Committee on Scrutiny of Regulations, which I chaired for a couple of years and served on for five or six years, whose whole purpose is to review the regulations that are ultimately made and then make sure that they are enabled in the legislation that was passed.

Sometimes, and quite frankly it happens far too often, governments try to put in the regulations things that are not contemplated in the bill itself and would in fact change it. It is called “back-door legislation”. It is where the purpose, scope or intent of the bill is changed without having it disclosed to parliamentarians.

I often say that when a bill is important enough, the House should ask the minister sponsoring the bill to present draft regulations to the committee responsible for reviewing the legislation, so that they can review it, not necessarily to change the regulations but simply to ensure that the regulations are properly enabled in the legislation and that the committee has an opportunity to make some comments with regard to whether there are any provisos that should be included in the regulations to make it better fit a specific case as opposed to simply the generic case.

If we have regulations that will apply to all three of these countries, there are some cases, as the previous speaker indicated, where a specific country, depending on its reputation or our circumstances with them, may require a more rigorous or more stringent approach to the regulations guiding legislation for that particular country. I wanted to raise that.

The final clause is that:

The Minister...shall cause a notice of the day on which the Convention enters into force

It just basically says that even if we pass this bill, even if it gets royal assent, et cetera, it is not actually going to become law until there is an order in council and a promulgation of the bill. Nobody knows when this is going to become law, if it will ever become law, but that is where that is.

Those same six clauses are in the bill three times, once for each of the three countries. As the parliamentary secretary noted in leading off this debate, there are four particular points that we should take into account.

First, with regard to reducing withholding taxes, I think there has been enough description about the fact that when people do business and earn income outside Canada, there is a withholding. For people who are not Canadians but are working in Canada, there may be withholding when it is paid to them outside.

Tax will follow people. If there is no treaty, one thing we could find is that people may be charged income taxes on the money by their country of residence and also by the country in which they did the work. This applies to people who have residency in one country and are doing work in another country. Both countries would claim that they needed to collect taxes or that there would be a liability for taxes. So the second point is the double taxation.

The reason we want to address the withholding tax is because we are not going to know whether there is double taxation until somebody files a tax return. But if the withholding tax rates are too high, all of a sudden an awful lot of taxes will be collected by two different government from people's earnings and they will not be able to reconcile them until some period later when they have figured out what income is attributed to which jurisdiction, what the tax rates are and how much they actually owe, and to claim refunds from one or the other or both jurisdictions.

So it is pretty important to deal with double taxation, and certainly one reason is that it is a barrier to trade.

If we do not have a tax treaty with another country with which Canada does business, or Canadians do a lot business there or that country does business in Canada, if they were going to be subject to taxation in both jurisdictions, obviously the value of the work done would have to be grossed up to take into account the fact that we cannot do work for nothing, if it is all going to be taxed back by the total taxes in two jurisdictions.

This issue of double taxation is very important. It would be a barrier to trade or to doing business or doing work between two countries, simply because there may be taxes collected in both jurisdictions that would leave a net income much lower than they could get by doing business in another country. There are some countries, obviously, that would be desirable for us to be able to do business in, and some maybe not, and we have heard a bit about that this morning.

The last point has to do with tax evasion and tax avoidance.

Interestingly enough, this morning the parliamentary secretary spent quite a bit of time talking about the fact that we need to deal with this whole issue of tax evasion and tax avoidance. There is a statement, if I could remember it, being a chartered accountant, that went something like this: tax evasion is illegal; tax avoidance is necessary.

The difference is that tax evasion is contrary to the laws and obviously illegal; but tax avoidance means that if the taxing authorities and the regulations of various countries let things slip through even if we have bilaterals, people may decide that they can do the same business, but if they do it through a particular country, with the amount of income they could earn or the reduction of taxes as a consequence of streaming business through a subsidiary in another country or something like that, they might be better off to do that. Of course, the consequence may be that the tax revenue to Canada would be reduced simply by the shaping of the characteristics of a business organization or corporate structure.

So dealing with the issue of tax avoidance is also an objective, even though tax avoidance is not in fact illegal.

That said, one of the speakers mentioned the recent stories about tax havens. That is a matter of tax avoidance, some would say, but actually it is tax evasion. I think the examples of Switzerland, Belgium, Liechtenstein, et cetera, have shown that there are circumstances out there where in fact countries with which we now have bilateral tax agreements happen to be tax havens and happen to be places where Canadians have been able to take advantage of the situation.

That list would get a lot worse if all of a sudden we started to do business with, I believe, Panama, Uruguay, Costa Rica, or Liberia, the whole list of countries that some people have thought we could be better off having business with and tax treaties.

However, it raises the question about whether one needs to look at the character or the country, its reputation and its track record. We want to do trade but trade at what cost? What does it mean if we have trade with 90 different countries and it is supposed to help deal with double taxation and tax avoidance? What good is that legislation if it has no results and no benefits have been achieved?

This concerns me because this morning, when the parliamentary secretary spoke to the House and there were questions and comments following his speech, I asked him a question. I said that we had tax conventions with 90 countries and I wanted to know what benefits we had achieve. I also asked him what loopholes we were able to close. I wanted to know what we had learned from this. If something is learned from one jurisdiction, it may be applicable to others.

In conjunction with these conventions we enter into, the member said that we also enter into information-sharing agreements. We have this exchange of information but what has that achieved? We need to ask whether we are just passing legislation for the sake of legislation or whether the legislation has some benefits to it, other than being pretty sure that if we lower the withholding tax more people will find it more attractive to do business with those countries. Bilateral trade is always a good thing. It is a good thing for this country because we are in an economic depression of sorts. Canada has much to offer and we want to do trade but if we get it in the front door but are losing it out the back door, what is the purpose?

I asked the parliamentary secretary to give us some examples. When he spoke to this on May 13 and again today, both of his speeches were much the same but there was not one iota of evidence that there was any benefit whatsoever to Canada. There was not one case where a tax evasion scheme was identified. There was not one case where all of a sudden there were avoidance mechanisms that we could deal with.

Legislation needs to have a purpose that is seamless in terms of all the impacts, all the pluses and minuses. No legislation will be perfect but we cannot come here and argue that we need this because it will improve trade. I hope that, as almost side deals with information agreements, we will somehow be able to share information and all of a sudden have some benefits coming out of that. It has never been reported to this place.

I challenge the government today to look at what has happened over the history of these tax conventions with 90 countries and tell us whether there has been anything substantive come out of them, whether we have learned anything that we can apply to other countries and whether there are filters we can put on in terms of the agreements that we will enter into with other countries like Greece, Turkey, Panama and whatever other countries.

I will support the bill because this is a boiler plate approach to doing things. My question is whether it is satisfactory simply to keep doing what we have always been doing if there are no discernable benefits to those deals.

Tax Conventions Implementation Act, 2010 November 22nd, 2010

Mr. Speaker, the member referred to the situation in the Senate with regard to the climate change protocol. It is a very unfortunate situation, but it says one thing, which is the Conservative government has no interest whatsoever in climate change, that it is still back at Kyoto and it being a socialist plot. There is no question that the decision of the Senate came straight from the Prime Minister's office.

With regard to Bill S-3, it is designated with the letter “S” because it was initiated in the Senate. However, if we look at the debate in the Senate, we will have a hard time reading it because it does not exist. The bill just appeared and was referred to the House.

It is an insult to Parliament for a chamber simply to take responsibility for a bill and then to pass it off. If we come up with anything, I wonder how the Conservatives will deal with it after it is passed in the House. It has already passed in the other place.

I am curious about whether the member wants to muse about why the bill came through the Senate and that the Senate had absolutely nothing to say about the importance of it.

Tax Conventions Implementation Act, 2010 November 22nd, 2010

Mr. Speaker, everyone knows when the member speaks, we should listen. There are some very subtle points that come up in every piece of legislation. We often have young people come to this place to listen. They just heard a few things about the bill, notwithstanding the generic attraction or benefits of having a bilateral treaty for taxation to deal with the matters it addresses.

The question is whether a particular country will be a receptive country from which we could expect a good solid information sharing agreement, which is part of the process. Also is there any progress with regard, for instance, on the evasion issues to report? We enter these agreements. The parliamentary secretary had no answer whatsoever as to how these agreements with over 90 countries have helped us. What are the consequences? What are the benefits? What are the dimensions? These are important aspects and I find it concerning, and maybe the member does too, that government members have not risen to speak so they do not have to take questions, which are some of the more important questions on the legislation.

Tax Conventions Implementation Act, 2010 November 22nd, 2010

Mr. Speaker, I think the member has outlined in the bill very well the importance of dealing with double taxation, and of course, probably the more interesting one is the anti-avoidance and tax evasion issues.

We have tax treaties with over 90 different countries. This bill has been described as stating that here are three more countries that we are putting on.

However, I think Canadians would like to know, if we are entering into these trade agreements and there will be supplementary tax treaties to deal with this, whether there have been any results as a consequence of entering into these bilateral treaties on tax, especially having to do with evasion.

I wonder if the member, being the Parliamentary Secretary to the Minister of Finance, would advise the House as to whether he has any examples of where any progress has been made in terms of dealing with tax havens, avoidance provisions, or in fact, tax evasion. Also, how much money has the Government of Canada recovered from these actions?

November 19th, 2010

Mr. Speaker, I am pleased to speak to Motion No. M-559, which ostensibly addresses how we may improve charitable giving. The two suggestions are general changes to the charitable tax credit amount and, second, the possible extension of capital gains exemptions to private company shares and real estate when donated.

The finance committee has conducted its prebudget consultations. It has had, I believe, some 450 submissions and has heard from about 150 or 160 witnesses. Many of these were giving representations in support of numerous changes that had to do with handling the charitable sector. The committee is now in receipt of its draft report and will be reporting very soon. As a consequence, it is not possible to undertake such a study, so that will probably be put off for some time.

That said, just so we do not raise expectations that this is something the committee will stop, we do have the second budget implementation bill. We also have the minister and officials coming before us on that.

It is interesting, though, if we were to look at the dimension, and I did get some statistics on Canadian donations. The average annual donation was $437, the median annual donation was $120, and 50% of donors who contribute $120 or less account for only 5% of the total amount contributed. The top 10% of donors, who contribute more than $1,000, account for 62%. So it is very much tracking in terms of income levels. Clearly, I am not sure whether this is the most efficient way to generate the dollars. In any event, these are areas in which work can be done to look at where there are some efficiencies.

I also had an opportunity to look at a C.D. Howe Institute report, just to give the member an idea of how many people have really looked at this. Canada has something like 80,000 registered charities, having $100 billion in annual revenue, and more in net assets, and the total charitable sector in Canada is about the size of the economy of British Columbia. So when we touch things, we are talking about big dollars.

As others have raised, the economic circumstances of the country obviously have to be taken into account, because to enhance the charitable credits or make additional assets available for contribution and to be creditable, that money comes straight out of the government coffers.

Obviously the key is whether or not we are giving enough to the charitable sector to do the job it wants, which I think is what Canadians would like to see. There is an awful lot of work. This is an enormous undertaking and should not be taken lightly, and would not be taken lightly by the finance committee, but it may very well have to farm it out to others who have the expertise to work the numbers, like the C.D. Howe Institute.

I want to raise as well, and the member will be aware, that there have been a number of ways proposed in dealing with the charitable sector. I just happened to notice that there were tax principles involved. I thought three of the models were interesting, just so the member understands how many people have really thought about this.

The first model is that the better the charity is at enhancing the quality of life for citizens, the greater the tax subsidy should be. It is really cause and effect. If we are enhancing the quality of life for citizens, we should get a higher tax subsidy. That would be one model.

The second model would be less responsive to the amount donated, and that is the after-tax cost of donations, the lower the tax subsidy should be received, so it depends on the financial impact to the government.

The third one I noted was the redistribution. If redistribution is a goal, charities that have high-income donors contributing disproportionately should receive a lower tax subsidy than others. Some are actually more successful than others and some have more money than they can possibly deal with, but they happen to be the ones that hit a chord, which tends to give them a benefit. It is another way to consider how we might deal with this.

I want to be sure I get on the record the fact, as I am sure the member is well aware, that some have written and expressed concern about the ethical situation within charities. Not to take this too far, there is a strong view that we should not consider any further changes until further actions are taken to enhance the transparency of charities and improve their governance.

The member will also be aware that there is a private member's bill now before the finance committee, which will be considering it before the end of November, and it has to do with the amount of compensation to charitable executives and the overall cost of operations. I know that the Canada Revenue Agency has benchmarks. If a charity were to use 75% of the moneys collected for operating costs and only 25% would in fact benefit the target audience, as it were, that sends up a red flag. There are a lot of tentacles and there is much work to do.

Having said that, I want to encourage the member by saying that I was very impressed by the people who appeared before the finance committee with regard to the need to enhance charitable giving. I know Mr. Johnston, who has been visiting Parliament for many years and knows many members of Parliament, and he makes a very good case.

Certainly the idea with regard to the exemption on the capital gains and expanding it for private companies turns out to be, ultimately, a question of how much impact that might have in terms of the government treasury and how it ranks in terms of priority with regard to the other needs of Canadians, as well as the imperative of being fiscally responsible at a time of financial duress.

The member has raised an excellent motion, but it is opening up, in my view, a very significant undertaking, which could not be done very easily or very lightly. It may take a very long time to do. I am not sure whether his committee would be prepared to take on something that might take months to do, but I know there has to be some consideration as to the scope and recommendations.

I understand where the member is coming from, and I can assure him that I will be voting to move it to our committee to have a look at it. As the member and the House will know, committees may from time to time have to report back to the House circumstances that do not permit it to do a full arrangement. Or they may propose other ways in which we can satisfy the questions the member has raised with regard to specific initiatives and generally with regard to the condition of the charitable sector.

November 19th, 2010

Mr. Speaker, I thank the member for presenting his motion. As a member of the finance committee, I am aware that a number of groups have come before the committee, proposing a number of changes.

The first item in his motion is to review the changes to the charitable tax credit amount, often referred to “just increase the rates of credit”. There is, however, an argument that by increasing the rate of credit, it simply is looking to increase the donations of those who already are giving generously. However, groups like Imagine Canada have been proposing something that is called “a stretch credit” to encourage new donors to start giving or those who are giving modest amounts to raise theirs.

Has the member considered the advisability of something like a stretch credit as opposed to just simply changing the tax credit rates?

G8 and G20 Summits November 19th, 2010

Mr. Speaker, yesterday the parliamentary secretary told us that the $100 million is under budget in fact. That means that the Conservatives have the full details now.

So, here is where we are. The minister is in contempt of Parliament, Julian Fantino is in hiding and the details of the $100 million are still missing.

Since Mr. Fantino has the information now, why does the government not find him, bring him to committee, swear him in and order him to tell the truth and explain how he spent the money?

G8 and G20 Summits November 19th, 2010

Mr. Speaker, five months after the G8 and G20 billion dollar debacle, the government is still ignoring the parliamentary order to release details of $100 million of contracts, which were due by October 12.

Those expenses were signed off by Julian Fantino, the Conservative candidate in the November 29 Vaughan byelection.

Coincidently, the government will not release the information until December 1.

Why are the Conservatives so desperately trying to hide Julian Fantino and his expenses?

Constitution Act, 2010 (Senate Term Limits) November 19th, 2010

Mr. Speaker, I agree with everything the member has said. The bill does not deal with the real problem. The real problem is that the Prime Minister has a problem with democracy. He knows that whenever he gets in trouble, all he has to do is bring up a bill like this or bring up another justice bill, something like getting tough on crime week, so we switch the channel and take the focus off the real issues, the real problems facing the nation.

The Conservatives do not want the bill passed. They have been playing around with it like a cat with a ball of wool, and they will continue to do that. They know this has better political mileage because they can continue to use their slogans like “undemocratic, unelected, useless people”. Yet every member in this place will go to an event to say goodbye to a senator when he or she retires because they respect the work that has been done.

The Conservatives cannot deny that. We have some work to do, but the Senate did not make decision to defeat Bill C-311. It was the Prime Minister himself.

Constitution Act, 2010 (Senate Term Limits) November 19th, 2010

I agree, Mr. Speaker, but the bill is not the solution when we consider some of the work that has been done, such as the work on mental health, the work on climate change in the Senate, the work on euthanasia.

Everybody in this place knows that the Conservative majority in the Senate did not make the decision to defeat Bill C-311 before it completed second reading. The direction came straight from the Prime Minister of Canada, who believes that Kyoto was a socialist plot.

The members know that.They should not blame the Senate for it. They should blame the Prime Minister and the Conservatives who cannot even hold on to an environment minister because they have no policy, no interest in the environment.