Finance committee  Our responses might be quite different.

Finance committee  Okay. I'd start by saying that the Canadian tax system cannot be abused by just shifting profits, passive income, into Barbados or any country. That isn't affected at all by this multilateral instrument or Bill C-82. It's our detailed foreign accrual property income, or FAPI, rules.

Finance committee  That's correct.

Finance committee  Sure. My concern is that those changes, the permanent establishment changes in particular, in my view, would be significant changes to our tax treaties. They're not just minor changes that would only affect a couple of companies and a couple of industries. It could affect virtually all cross-border businesses and could result in Canadian companies having to file tax returns, for example, in many countries around the world and having many countries around the world having a right to tax those Canadian profits.

Finance committee  Yes, Luxembourg—

Finance committee  Right, but I believe they have a lot of capital inflows and outflows, so I'm just not sure what their position would be.

Finance committee  Sure, and again, I'm just using resource companies as a simple example—

Finance committee  —but it can apply across industries, just to be clear. I'm going to simplify, as much as I can, international tax and try to translate from tax to English, but please excuse me if I don't get fully out of tax. What tax treaties do is to really allocate taxing rights between a residence country and a source country.

Finance committee  Sure. First, in terms of which provisions Canada should adopt, some of them are mandatory, so—

Finance committee  —I think that's kind of been decided already. Others are optional. I think your question is focusing more on the optional ones.

Finance committee  My point on the guidance was really about the mandatory ones. That's what I wanted to confirm, because a limitation-on-benefits rule is easier to apply objectively—you know when it applies—but it's much more complicated and, therefore, it's generally done on a bilateral basis. That's the approach the U.S. has taken, and that's in large part why the U.S. has not signed on to the multi-level instrument at all.

Finance committee  To clarify, I'll go back to my example, and I'll try to make it—

Finance committee  Yes, the Luxembourg example. You're absolutely right. If it's determined that one of the principal purposes, in that example, for using a Luxembourg holding company, is to invest into Canada, the principal purpose test turns off treaty benefits under the Canada-Luxembourg tax treaty.

Finance committee  Thank you for having me here today. I just want to start by saying that I, too, generally support Bill C-82 and the ratification of the MLI in Canada. However, I do have some important concerns that I want to mention to you with respect to the process and manner in which it's ratified and adopted in Canada.

Finance committee  No, I haven't.