Mr. Speaker, I am pleased to rise in the House to speak to Bill S-6, following two of my colleagues who have already spoken on this subject.
At first glance, this bill may seem a bit dull. I will therefore try to be as interesting as possible to ensure that Canadians tuning in know how important these issues are and that there are risks associated with establishing tax treaties with other countries. That is what is at stake here. A new tax treaty is being proposed to us. As we already have 93 of them, this would be our 94th tax treaty. That is not a small number. Consequently, we should not take this new treaty lightly, since it will be one of a series of treaties we have with many countries that have significant tax implications.
All Canadians feel concerned about tax issues because they all file a tax return each year to pay their dues and get all the credits to which they are entitled. They all know that taxation is an extremely important issue related to fairness and justice.
I have said this before, but in our country, we are fortunate to have a tax system that allows the federal, provincial and municipal governments to deliver services to the public. In some provinces, there are even school boards with a tax system. The ultimate goal of taxation is to ensure that the government can operate, but the government's primary focus is to serve the public and provide the best possible services to Canadians. They deserve value for their money, as they say in the business world.
When we buy a product or service, we want value for our money. The same goes for taxation. When we pay taxes to different levels of government, we hope to get our money's worth and get good services. The problem is that some Canadians feel like other taxpayers like them, usually the rich, are getting out of paying taxes by hiding their money either in Canada or offshore.
Some cases involve domestic tax evasion. For example, there are people who work under the table and hide their cash under a rug or in a mattress. We have all heard of that before. In other cases, people hide their money in tax havens. In both cases, the principle is the same, namely to avoid paying their fair share of taxes to the system that helps provide services to all Canadians.
As I have said in other debates on taxation, most Canadians receive more in services than they contribute in taxes. That much is clear when we add up all the services they receive. This means that we have a fair system, but it needs to be even more progressive so that the least well off can still receive the best services.
No one wants to live in a country or a society where a person's wealth determines the services they receive from the government. It is therefore important to make sure that the wealthy contribute their fair share, especially multinationals and Canadian banks, which post record earnings in the billions of dollars every year, and which make use of many tax havens. This is fundamental to preserving Canadians' trust in our tax system.
This is perhaps a brief preamble to the debate we are having on tax treaties, which avoid double taxation.
I will use an example that many Canadians will recognize. Consider a Canadian company that has a U.S. subsidiary or does business there. If that company pays taxes there, where rates are similar or even higher than ours, it will not be taxed a second time when its profits are repatriated to Canada. That is the basic premise of tax treaties, and it is a matter of fairness. If the taxpayer pays taxes in another country, that money should not be taxed a second time when it is brought home. The main purpose of a tax treaty is to avoid taxing the same income twice.
Having said that, this makes sense in the case of countries like the United States, which has tax rates that are comparable to and even higher than ours depending on the state. However, in the case of other countries with which we have tax treaties, we must ask ourselves what the real purpose of the treaty is. Take for instance Barbados, with which we have a tax treaty. Barbados is a small country. For reasons that are still unclear to me, even though I have asked many questions about it, this country ranks third, and sometimes even second, in terms of countries where Canada makes direct investments abroad. This information comes from Statistics Canada. Barbados, of all the countries in the world, ranks third in terms of Canadian investment. After the United States and the United Kingdom, Barbados often ranks third or fourth in terms of our foreign direct investments. We have to ask ourselves why.
The answer seems simple to me. We have an agreement with Barbados to prevent double taxation, and Barbados has a tax rate ranging from 0.5% to 2.5% for foreign companies. We need look no further to understand this. This is not new, but from 1982. It was one of the first international tax treaties we signed.
When we ask questions about this agreement with Barbados, we hear snippets about why, historically, we have this very close relationship with Barbados. It is hard to find it anywhere in writing, but Barbados being Canadian companies' gateway to the rest of the world actually seems to be part of Canada's tax policy. If a Canadian company wants to do business abroad, Barbados is the gateway to those countries with its low tax rates ranging from 0.5% to 2.5% for foreign corporations. A Canadian company that establishes a subsidiary in Barbados will do business with countries from around the world, and since their revenues are reported in Barbados, that is where they are taxed. Instead of being based in Canada, the company uses Barbados as the gateway to the entire world. The government will not admit it but, unofficially, during many discussions, I heard that this tax policy dates back to 1982, and that Canada adopted it because that is what every other country was doing. We are being told that we have to do this because everyone else is. If everyone is doing it, why should Canada be put at a disadvantage by not doing it? That is what we are hearing.
It is extremely important now, more than ever, to have a real discussion and to work together on tax havens, even though the current and former governments have never taken real action on this. More than ever, we need to put an end to these dishonest practices by many taxpayers, especially companies and multinationals, which use shell companies in tax havens all around the world.
Barbados is the preferred tax haven for Canadians. Other countries will have another. We need to put an end to this practice for good. All industrialized countries that are missing out on taxes and whose tax base is incorrect as a result of these practices need to get what they are entitled to. They are owed the taxes that these multinationals generate on their billions of dollars in profits every year. These billions made all over the world are hidden away in bank accounts, in tax havens, to avoid fair and equitable taxation that would be used to provide public services.
The worst is that these companies are often the first to make use of these public services. They are the first to use the infrastructure that our industrialized countries have built. Their employees are the first to use roads, public transit and public services like education and health care. It can therefore be argued that they are taking advantage of Canada. They are taking advantage of Canada's system and of its generosity, and they are then hiding their money abroad, without contributing to our system in return.
What we keep hearing from governments, especially Conservative ones, is that there is not enough money. Fortunately, not all of them are sending that message, but around the world, more and more of them are saying that the money has run out and that governments no longer have the means to provide services to Canadians. Governments are drowning in debt, they cannot balance their budgets, and they have to cut services, yet billions of dollars are being hidden abroad, where they are not contributing to society as they should. We want to see more services, better services, services that benefit everyone, including people in Canada, of course.
That is the crux of the matter. That is why it is important to consider this issue carefully. Far from being a boring bill, Bill S-6 is exciting. The tax convention with Madagascar may enable continued abuse of a convention. I am not alone in saying that tax agreements are being abused. Bill C-82 is being debated at this very moment two floors down in a committee room.
As finance departments officials themselves have admitted, taxpayers can and do abuse tax treaties. That is why Bill C-82 was tabled. It is clear, it has been said in so many words, which is fortunate. I think this was the first time I heard anyone admit it out loud. Earlier I was saying that we often hear things through the grapevine that are never said out loud into a microphone. However, it was said loud and clear that tax treaties do get abused, which is why Bill C-82 had to be tabled and now has to be passed.
My question for the parliamentary secretary, who did not seem to know the answer, was related to that. I actually know the answer to my own question. Bill S-6 follows the old tax treaty model, which, by the government's own admission, produced tax treaties that get abused.
Today we are debating a bill on a tax treaty with Madagascar. In this case, it seems all right. As I said earlier, we do not want double taxation. Madagascar has reasonable tax rates that are comparable to those in Canada. That is fine, but we do not want tax treaties to be abused.
However, Bill C-82 demonstrates that tax treaty abuse is already happening. Also, Bill S-6 seeks to adopt a treaty just like the ones that the Liberals themselves admit are open to abuse. That makes no sense.
They should have taken the time to negotiate the treaty using the new model developed by the OECD to come out with a better agreement. I am not saying it would have been perfect—and I will be saying that in committee—but at least it would have been a step in the right direction. They acknowledge that tax treaty abuse is a possibility, and they are making an effort to close these loopholes in the treaties to keep that from happening. However, by the government's own admission, taxpayers could abuse this treaty.
That is why I wanted to say in my speech today that the government has a responsibility to make a clear commitment to ensure that these conventions cannot be abused over time. As I was saying earlier, a convention with Madagascar is a good idea because its tax rate is similar to Canada's.
However, this does not meant that five years down the road, Madagascar will not become a tax haven or will not change its tax laws to lower the tax rate of foreign companies operating on its territory. We need to ensure that there is a monitoring and control mechanism. We need to monitor the 94 conventions that are in place to ensure that they do not become tax conventions that can be abused. That is extremely important. Unfortunately, the government did not commit to monitor the conventions and ensure that they do not become gateways to tax evasion and aggressive tax avoidance for Canadian companies. As everyone knows, tax evasion is reprehensible and illegal.
The government talks a lot about tax evasion and says it is doing great things to address it, but the Liberals do not have any results to show Canadians.
The Conservatives got zero results in that regard, and they had no intention of doing anything to address tax evasion. For the benefit of Conservatives who may be listening, I repeat, a former minister of national revenue even admitted that tax evasion was not a priority. I did not address that in my speech, but I did mention it in a question I asked my Conservative colleague, although that member made no reference to the issue. Jean-Pierre Blackburn admitted that tax evasion was not a priority.
This government promised to do more to combat tax evasion, but it has no results to show for it either, even though concrete results are all that matter. It is all well and good for the government to say that it is doing what is necessary, it has invested $1 billion and it hired 1,300 auditors, but if there is nothing to prove that the plan is effective, then clearly it is not working. This government does not have the motivation or any real intention of getting to the heart of the problem. The government is actually only scratching the surface.
Since the Liberals took power, there have been three tax and financial scandals: the Bahama leaks, the Paradise papers and the Panama papers. In all three cases, it was determined that many Canadians were involved in these scandals. Today, three years later, no taxpayers have been convicted of tax evasion. Worse still, no charges have been laid against even one taxpayer involved in these financial and tax scandals. This clearly shows that the system is not working and that it is flawed.
Even if they invested $1 billion and hired 1,300 auditors—as the Minister of National Revenue says every day—if the system is flawed, nothing will change. Taxpayers will still be able to shirk their responsibilities. That is the crux of the matter, but the government refuses to see it.
The tax system needs to be reformed as a whole. It is not enough to close a few loopholes here and there. The first version of the tax code was 15 pages long. Today, the code is 1,800 pages long. This is proof that the system is flawed.
Canada's chartered accountants are calling for a comprehensive reform of the tax system. That is what is at issue today, and that is what the government needs to address. Otherwise, investing $1 billion and hiring 1,300 auditors will not change anything. The government must review the Canadian tax code from top to bottom, to simplify it and ensure that everyone pays their fair share. It is often easier to comply with something simple.
I hope that the government will also study this issue. The NDP is committed to reviewing the entire tax code in order to close all loopholes and have a simple tax code.
Canadians expect to receive quality services commensurate with the money they invest in the system.