Mr. Speaker, I am happy to take the floor after my colleague from Rosemont—La Petite-Patrie. I thank him for tabling this motion which is extremely pertinent in the context of last week’s revelations about the KPMG affair. That affair is coming back to haunt the Minister of National Revenue, who had quite a hard time defending herself yesterday in the House over settlements negotiated with tax evaders.
This issue is a priority for the NDP, which is fighting for greater equality and tax fairness. That is why we are debating this motion today. We hope all members of the House will support these measures, which can be taken immediately or in short order to resolve this major problem. I would like to discuss some of the solutions we are proposing to the government. It is my understanding that the government may support our motion, so I am optimistic about convincing it that these short-term measures are feasible. They will help reduce the inequality in our society.
We reserve our harshest criticism for the fact that we have a two-tier tax system. Not only is there an endless array of tax credits, deductions, and exemptions for businesses and the wealthy, but also, if ever the Canada Revenue Agency does catch up with them, they typically negotiate deals to pay back the money they owe to society at preferential interest rates while avoiding penalties and fines that could, at the very least, serve as a warning to others.
That is why Canadians are so outraged by what they have seen in the recent reports. It seems as though there is a two-tier system: one for wealthy taxpayers, multimillionaires and billionaires, and another for ordinary taxpayers. If the latter make a mistake, even acting in good faith, or if they fail to report income, the CRA is ruthless and does not hesitate to drag those taxpayers to court, people who may not have the means to defend themselves. Wealthy taxpayers, meanwhile, are offered amnesty deals. They are asked to pay the taxes they should have paid in the first place and are told that all will be forgotten. The slate is wiped clean moving forward for them, and yet, ordinary taxpayers are not given the same advantage.
Our motion comes at a time when international tax competition is becoming increasingly fierce. This competition is extremely harmful to tax bases all over the world. This problem is not unique to Canada. The problem of tax evasion and aggressive tax avoidance exists around the globe because of certain unscrupulous countries that are contributing to this highly competitive tax environment in which each country tries to have the lowest tax rates and give tax benefits to companies and wealthy taxpayers so that they will do business there.
Canada is no exception. In some ways, we play into this competitive tax environment. Many of the tax measures that are in place today are a product of that very environment. Canada grants benefits, deductions here and exemptions there. In the end, only the wealthiest members of our society benefit. If we talk to our neighbours, if we go door to door and ask average taxpayers if they are receiving deductions for dividends, tax credits, or capital gains exemptions, if we ask ordinary people about that, we see that they are not the ones benefitting from these credits. Only the upper class benefits from these measures, which are found within a framework that encourages Canada to compete in a way that is damaging in the long term. We may be making some gains here and there in the short term, but this approach is not productive in the long term because, if all of that money is left in the pockets of the rich, we are not able to provide quality services to Canadians.
Let us not forget that services are not free. As a society, we collectively decide to pool our resources to achieve our goals, in other words, provide high quality and affordable, even free, services to the entire population. That way, regardless of where a person comes from or their financial situation, they can obtain said services. Take health care, for example. We want health care to be provided to everyone, independently of their income. We want everyone to have access to an education without having to spend a fortune on it.
My philosophy is that we should pool our efforts and money to provide our fellow citizens with the best services at the best possible cost. Tax competition is causing us to lose more and more means to provide services. Governments are forced to cut more and more from services or increase prices, which is really unfortunate.
That is why we are focusing on a few solutions. Among other things, the government needs to tighten the rules around shell companies. How many shell companies are in tax havens that are actively part of this tax competition? How many shell companies are being used only to report profits offshore?
It is one of our society's biggest problems. Real economic activity takes place here, in Canada, or in other industrialized countries, where consumers live. The consumers are not in Barbados, but in Canada, the United States, and Europe. Even though the economic activity takes place in these countries, the profits are reported elsewhere, with different schemes that are increasingly complex. Over the years, the OECD and the government have worked together to address tax schemes. In our opinion, the profits should be reported where the economic activities take place.
Accordingly, if the economic activities take place in Canada, then the Canadian subsidiary must pay its taxes in Canada. That is currently not the case. That is why the motion mentions shell companies. We must tighten the rules for these companies. There is work being done on this. We have to tighten the rules in order to ensure that companies report their profits where the economic activity really takes place and not in countries where taxes are low.
Tax treaties are another issue. Since my colleague has talked about this, I will not go on at length about the subject. In some cases, tax treaties have legalized non-taxation. The goal was to do something good by not taxing the same income twice. For example, if a Canadian company does business in the United States through an American subsidiary and the subsidiary pays taxes at a higher rate than in Canada and then repatriates its profits for its Canadian shareholders, obviously that will not be taxed twice; we are not crazy.
However, double taxation agreements have been signed with countries that have a low or non-existent tax rate; Barbados is the best example of this. There is a good reason why billions of dollars in foreign investment are finding their way to Barbados. Barbados is second on the list of countries where Canada makes the most foreign investments. As I said earlier, that is certainly not where the consumers are, and that is not where real business is being done. That is where the profits are reported, and that is where billions of dollars are sent every year. In Barbados, the tax rate is between 0.25% and 2%. Canada and Barbados have a double taxation agreement. My colleague provided more details on this subject a little earlier.
We are asking that the government examine this question, to ensure that double taxation agreements are not being abused. In this case, there has certainly been abuse.
We must make every effort to create something that is not a two-tier system. This is a major problem that Canadians condemn. In the KPMG case, agreements were signed and settlements negotiated. It was told that its slate would be wiped clean if it paid the tax owed. It was decided that all would be forgotten.
It is not too late for the government to file criminal charges in the case of KPMG, which facilitates tax evasion and aggressive tax avoidance, and against the clients who participated in this scheme. In fact, that is what I asked the Minister of National Revenue to do, yesterday. That would allow for exemplary sentences to be imposed, and it would show others what happens when you engage in tax evasion. We hope that will mean we can put an end to this scourge in our society.
