moved:
That, in the opinion of this House, in order to ensure tax equity, the government should terminate Canada's tax convention with Barbados, a tax haven, which enables wealthy Canadian taxpayers and companies to avoid their tax obligations, and should play a leadership role at the international level in activities to eliminate tax havens.
Mr. Speaker, I am extremely pleased to rise today to bring this motion forward in the House. It is a recurring and worsening issue and an issue Canada has ignored here in the House. All hon. members will agree with me that the Bloc Quebecois has taken an excellent initiative in addressing this issue right away.
I think the motion deserves to be read again.
That, in the opinion of this House, in order to ensure tax equity, the government should terminate Canada's tax convention with Barbados, a tax haven, which enables wealthy Canadian taxpayers and companies to avoid their tax obligations, and should play a leadership role at the international level in activities to eliminate tax havens.
Why is this motion being brought forward? First of all, tax havens are places or jurisdictions which attract individuals and businesses who refuse to pay income tax like everyone else.
We must remember that governments do not levy taxes simply for their own pleasure, but in order to have the collective tools, public services, and wealth redistribution programs available to improve the welfare of the population, in this case, the population of Canada and Quebec.
Those who take advantage of tax havens are setting themselves apart from the rest of Canadians and Quebeckers, and that ought to be exposed.
Obviously, the current context allows this to go on. To a certain extent, it is not illegal to use tax havens, but in my opinion, it is illegitimate and immoral, particularly when the individual in question is a former minister of finance who wants to be the next Prime Minister.
This is what I call grey money. It is the result of tax evasion. Sometimes, this money is also the result of tax fraud. I will expand on this later.
It gets worse. This grey money gets mixed with dirty money. International organized crime groups use tax havens to launder money. Their method of choice to launder money, be it related to drugs, prostitution, arms trafficking, the corruption of politicians in certain countries or terrorism, is tax havens.
According to current estimates, some $5,000 billion is sheltered in tax havens, $1,000 billion of which is laundered money used by international crime rings for various purposes.
It is somewhat surprising that so little has been done about tax havens in the wake of the tragic events of September 11, when governments agreed in the weeks that followed to tighten various national and international laws, so that international terrorist groups could not use the loopholes in the international financial system to obtain funds by sending them from one anonymous account to another.
I said this to the Auditor General. In her most recent report, she included an appendix explaining the various schemes used by organized crime to launder money. She made no reference to tax havens. I told her that there is an immediate and direct link between money laundering and tax havens. She promised me that she would examine this matter. Knowing her as I do, I am certain that her next report will make the connection.
In 1999, Canadians invested $17 billion in tax shelters in Barbados, to give one example. It is not peanuts. Two years later, in 2001, Canadian taxpayers, both individuals and corporations, put $23.3 billion in tax shelters in Barbados.
You will be surprised to learn that Barbados is the third most favoured destination for Canadians as far as direct investments are concerned. One might have expected Canadian investors to send money to developed countries like France, Japan, Italy or Germany in order to profit from their economy. But no, after the United States and Great Britain, Barbados is their favourite.
There is no way I am convinced that these investments going to Barbados are always used to generate income. A very considerable portion of this $23 billion is sometimes there for the purpose of tax evasion, sometimes for tax fraud, or sometimes for money laundering by organized crime.
What is more, this money is protected by an agreement between Canada and Barbados signed by the former Minister of Finance. As a result, the Canadians concerned can avoid paying taxes here in Canada.
Obviously, it will be argued that Barbados has been taken off the list of countries the OECD considers tax havens.
If it has been taken off the list, this was because 13 countries, Canada among them, said that if certain countries were not removed, they would withdraw from the proceedings under way at the time to tighten the rules on money laundering.
So Canada, which generally boasts of its lead role in connection with all manner of rights and concerns, is one of only seven signatories of a tax convention with Barbados. Of all the countries on this planet, a mere seven—one of these the U.S., I must point out—have signed a convention with Barbados. This shows just how immoral this Canadian initiative is, sanctioning as it does the existence of this tax haven.
As I have said, nothing has actually changed in Barbados, even though it was struck from the OECD list. Take its taxation system, for example: you may find it interesting that the tax rate varies between 1% and 2.5%.
If you have $15 million US or more in assets, you pay 1%. If you have less than $5 million US in assets, you pay 2.5%. That makes no sense, it should be the other way around. And yet, the less money you have, the more taxes you pay.
This is a regressive tax system, therefore. Of course, it applies to extremely rich individuals and companies. No one feels sorry for them, but a tax rate like that is unfair competition that erodes the tax base in Canada and in a number of other western countries.
There is no capital gains tax and no financial surveillance. It is total bank secrecy.
Canada's big five banks do not hesitate to use the tax havens. The big five banks have operations in 26 tax havens, including several that are blacklisted by the Financial Action Task Force on Money Laundering, or FATF, of the OECD.
Canadian banks have 61 branches in the tax havens. The Bank of Nova Scotia leads the way with branches in 23 tax havens, followed by the Royal Bank of Canada, which has 17, CIBC, 12, the Bank of Montreal, 5, and TD Bank, 3.
While the governments and states of these tax havens can be accused of being bad administrators or bad managers, there are those in Canada who are really taking advantage of the situation, notably some of our best known companies internationally.
That explains why the motion says that the tax convention with Barbados should be terminated immediately, I would even say do away with it completely. Canada must also take a firmer stand against tax havens.
I said earlier that some major Canadian banks have operations in the tax havens that are on the FTAF black list. A representative from ATTAC-Québec, François Gosselin, wrote to all the banks asking why they were active in the tax havens at his expense. It is the average citizen who pays, because those corporate citizens and individuals refuse to pay income tax like the rest of Canadians and Quebeckers.
The answer received from Mr. Dougall, of Scotiabank, which is the Canadian bank that has the most branches in tax havens, reads as follows:
If we went by the FATF (Financial Action Task Force on Money Laundering) list when it comes to starting up or shutting down operations, this would have a very adverse impact on the economies and workers of the countries concerned, especially since this list is constantly changing depending on the results of the review of local laws and procedures.
Scotiabank is apparently investing in these tax havens in the interest of the countries concerned. It says here, “especially since this list is constantly changing depending on the results of the review of local laws and procedures”. I refuse to believe that Scotiabank makes investments in the Bahamas and 23 other tax havens in the interest of the local people. It is well known that money invested in tax havens does not in any way benefit the local population or economy, but is used to fatten up a handful, and sometimes a corrupt handful, of local politicians.
Fortunately, there is one bank that is more honest, morally, than Scotiabank. I am talking about the Royal Bank. In reply to the same letter, the Royal Bank at least had the decency to tell the truth.
A Royal Bank official wrote:
RBC Financial Group would be at a competitive disadvantage, and its share value would decline, if it were to unilaterally decide to cease operations in any of these places.
We are still talking about tax havens, and those blacklisted by the FATF. He wrote further:
Unless specifically prohibited by law, RBC Financial Group must be able to take advantage of business opportunities in any region, in order to provide its clients with internationally integrated financial services.
That is the truth. At present, Canadian legislation does not prohibit this. The Royal Bank is taking advantage of it for its shareholders and clients. It is an accomplice of these tax havens. But again, this is not illegal. That is why the motion says that we must not only terminate the tax convention with Barbados but also play a leadership role in establishing laws and regulations at the international level, be it at the World Trade Organization or as part of the negotiation of the Free Trade Area of the Americas, to eliminate such practices or make them illegal.
I thank the Royal Bank official for at least enlightening us as to the real reason they have operations in these tax havens.
Who benefits from these tax havens? Canada's big banks, of course. Still, the major banks are not the only ones. There are individuals who benefit as well. It is interesting to note, as I said earlier, that tax havens are countries, or sometimes territories or free zones within certain countries, and not always developing countries. There are such zones in European countries and in the United States, too, that are tax havens. That may explain why there is a contradiction in what we are hearing, when on one hand, people say they want to tighten up the rules on money laundering, and on the other hand, nothing is done.
These zones encourage bank secrecy. Their officials are not very inquisitive, their taxes are light, as I pointed out, and they specialize in various fields. Sometimes anonymous trusts are set up, making it possible for individuals and companies to avoid their fiscal responsibilities. Other times, it may be individuals or businesses. And we know that ship owners are among the heaviest users of these tax havens.
There have been laws passed in this House—I believe the hon. member for Saint-Hyacinthe—Bagot will be able to speak to this more fully later on—which have directly benefited the former finance minister and his businesses which, we should point out, he has transferred to his children. If I have time, I will come back to this point.
Thus, minimal taxation, virtual corporations, leading-edge high-tech infrastructures, and contracts in most banks mean that today, even the upper middle class has easy access to tax havens.
And that is why the Auditor General is right to be worried. It is not just the very rich businesses and the very rich taxpayers who could take advantage of such stratagems tomorrow to evade their fiscal obligations. It could be anyone who has access to brokers through the Internet. Action must be taken quickly.
To illustrate the fact that anyone can benefit from tax havens as long as one has enough money to pay for the necessary services, I give as an example the former finance minister's businesses registered in Barbados. That should say something about the sort of businesses found in these tax havens.
These companies are directly or indirectly owned by Canada Steamship Lines. The former finance minister, the hon. member for LaSalle—Émard transferred his shares in this company to his son.
So, there is Atlasco Shipping Ltd., head office, Barbados; CSL Cabo Shipping Inc., head office, Barbados; Paiton Shipping Inc., head office, Barbados; Semisub Transshippers Inc., head office, Barbados; Lati Transshippers Inc., head office, Barbados; Hull 2227 Shipping Inc, head office, Barbados; Hull 2229—the former finance minister was seemingly lacking in imagination when he named these companies—, head office, Barbados; Guadeloupe Cable International Inc., head office, Barbados. There are others, but I will not bore the House with the list of what our former finance minister and future Prime Minister used to own.
There is a moral problem. It must be mentioned. And perhaps we would be doing the former finance minister and future Prime Minister a favour by adopting my motion, which seeks to ensure that there is no hint of conflict of interest.
I would remind the House that even if the companies were transferred—I am giving this example, because it is really the tip of the iceberg, and it bothers many of my constituents, who are doubtless not alone— the ethics counsellor, who is not known for his tough stand on ethics problems, stated nonetheless in a letter he sent to the member for LaSalle—Émard on July 28, 2003:
—there will still be a requirement for you to recuse from a narrow range of matters—
He must do so once he becomes Prime Minister.
—which would be directly beneficial to Canadian Steamship Lines. When the transfer is complete I know you will personally have no further financial interest in CSL.
It was completed at the end of August.
Ownership will, however, rest with your sons.
Yes, but let us not be naive here.
The ethics counsellor continues:
By definition this transfer has to be distinguished from a sale to a third party—
This illustrates the need to keep right out of certain decisions. Even though it was transferred to his sons, the ethics councillor is not naïve either. He knows full well that there could be a conflict of interest in the decisions made by the future Prime Minister.
In that sense, we would be doing him a favour by adopting my motion.
The report entitled “Rapport moral sur l'argent dans le monde, 2001”, published by the Association française d'économie financière, identifies 35 countries or territories as tax havens. There are 4,000 offshore banks. These offshore banks are reserved for non-residents. The term offshore comes from the time of prohibition. Americans would take boats to the U.S. maritime boundary in order to drink and gamble. That is where the expression comes from.
There are 2.4 million shadow companies, fake companies, fictitious companies, that are simply there to protect individuals and companies from having to pay taxes.
I mentioned earlier that there is currently $5,000 billion in assets in these tax havens. I will give an example. The Cayman Islands have a population of 26,000, which is not a lot. However, for those 26,000 people, there are 450 banks. Those people must be very wealthy indeed. I wonder what the main industry is in that country. There is $400 billion dollars in assets in a country of 26,000. I cannot believe that the money in those 450 banks belongs to the local residents. It is dirty money or grey money from all over the world. This is morally unacceptable for a civilized society, if we consider our common desire to have fair development for the whole planet.
As I said earlier, the auditor general is worried. I will read what she said in her report:
Failure to take urgent action on these matters will severely limit Revenue Canada's ability to manage the risks to Canada's tax base that international transactions represent.
This is not a Bloc Quebecois invention. It comes from the Auditor General. Since his report —and it was a he at the time—nothing has happened. My motion offers us an opportunity to remedy this.
I have just listed three places: the Bahamas, Bermuda and Barbados. We have seen that Barbados is the favoured place for the major Canadian banks, as well as the former finance minister. They are not the only ones, however, as there are 1,700 Canadian corporations in Barbados, and it is the third favourite foreign investment destination. All told, $40 billion has left Canada for the tax havens of Barbados, Bermuda and the Bahamas combined.
Once again, in the 2001 auditor general report, a number of the strategies used were studied. She found that that 53 taxpayers had managed to save $800 million in taxes by using one or the other of these known tax havens.
According to the report:
The Agency has identified 53 examples of this scheme—
She went on to list a whole series of schemes, ending with a recommendation that the government and the House take the necessary steps to ensure that the Canada-Barbados tax convention is not prejudicial to our ability to collect taxes.
The only way to solve the problem is to terminate, do completely away with, this tax convention with Barbados, and to expand our international service at Revenue Canada. Canadian legislation must be extraterritorial and Canadian companies must be answerable to the Parliament of Canada, regardless of where they are actually located on the planet, when they are seeking to escape social responsibility. Canada must—and the Bloc Quebecois will lobby for this—change its attitude toward tax havens and abandon its complacency.
This must in fact be an ongoing concern in all conventions and negotiations in which we are currently involved internationally.
In closing, it is my hope that the House will give unanimous support to a motion which, in my opinion, is nothing more than common sense.
