:
Mr. Speaker, I am pleased to rise today to speak to this fascinating bill, Bill .
The bill represents a necessary update to the Income Tax Act, particularly as it relates to foreign amendments and other domestic measures. The majority of the bill's provisions are taken from the Liberal government's budget of 1999. The government put the proposed changes up for public comment in July 2005. The changes we are debating today also contain revisions made to that July 2005 release.
Although the amendments to the income tax will be mainly administrative, it is important to highlight them to have a better understanding ahead of an eventual vote.
The bill can be broken down into three parts.
Part one deals with amendments to provisions of the Income Tax Act governing the taxation of non-resident trusts and their beneficiaries and of Canadian taxpayers who have interests in foreign investment entities.
Part two deals with technical amendments that were included in part one of a discussion draft entitled “Legislative Draft Proposals and Draft Regulations Relating to Income Tax”, released by the minister of finance in February 2004.
Part three deals with provisions of the act not opened up in parts one and two.
The proposed measures in part one deal with non-resident trusts and foreign investment entities designed to ensure Canada is properly taxing those Canadians who are earning income through foreign intermediaries in the same manner that income would have been taxed had it been earned directly.
It is essential that Canada close tax avoiding loopholes, not only to protect our own tax base but also to demonstrate our commitment to the international community. We must show our international partners that Canada takes its international responsibilities seriously and that Canada is not a destination for taxation loopholes.
If I look at the bill, it is over 500 pages long. It is not likely that anybody in the chamber has read it. Even if people have, I am not too convinced they can understand this type of bill. However, as vice-chairman of the finance committee, I look forward to sending the bill to the finance committee after second reading so we can further study to determine if any amendments will be needed to make it an even better bill than what it is today.
We need bills like this. They may be complex, but in debating the bill in the past, members have decided to concentrate their points on other areas. As an accountant, I know the foundation of these bills are important. They are just as important as any other bill we debate in the House. That is why, if read some of the debate that went on in previous sessions by members of the opposition, especially government members, they had trouble determining what was a tax haven, what was a tax treaty and what were international tax agreements.
Tax havens are jurisdictions where people park their money, or investments, and they pay no income tax on the income generated on these moneys. Tax havens are countries like Bermuda, Cayman Islands, Turks and Caicos, Gibralter, just to name a few, where people or companies put their money, leave it there and it accumulates tax free. The purpose of the bill is not to address tax havens.
The second point is government members feel these are tax treaties. This is not a tax treaty. A tax treaty is like one of the bills we discussed a few months ago, Bill . Tax treaties are conventions between two countries. Normally the purpose of the tax treaty is to avoid double taxation so Canadians or residents of the other countries do not have to pay double tax. Bill S-5 was our agreement with countries like Mexico, South Korea and Finland.
Some of the other problems we get into when we speak about tax treaties, tax havens and international conventions is our tax base does not get protected. Canada's tax base needs to be protected. If people start taking their hard-earned money and parking it elsewhere, Canada will be unable to maintain the revenue stream that we need so we can rely on the social programs.
The other item that makes Bill important is there are advantages to using a non-resident trust. If we do not put limits on it, the foreign investment entities will be eliminated.
There are a lot of points on which I would like to speak, but one of the items is the international tax agreements. We can sign these international tax agreements because this affects foreign entities. From what I understand, in the 1990s, although I was not in the House then but perhaps the Speaker was, a tax treaty with Italy was passed by the House. Italy has yet to ratify that treaty.
Italy now has two members of Parliament from other countries who sit in the House of Commons. It has an elected member of Parliament representing the riding of North America. One member of Parliament was born in the United States. The other one was born in Canada. It even has a senator. These elected members of Parliament and senator live outside of Italy but they have full right of vote. One MP seems to be lobbying. He has asked what has happened with the treaty. It was signed with Canada but it has not been ratified.
This is a typical example of a treaty we signed with a developed country and there has been no advancement. Some residents of both countries have had to pay double tax. Then they have to file their tax returns to get some of the money back, all because one country has ratified the treaty and the other country has not.
We can talk about the tax treaties and what these types of bills do on the international scene. When we look at what the government has done in the last little while on its international tax position, we think about regulation. I read in the today's paper that we have a regulation as to foreign ownership in the telecom sector, but we still see foreign entities trying to take over one of our biggest corporations in Canada, BCE, formerly Bell Canada.
Some of the articles say that they are looking for Canadian partners. If we do not protect ourselves with agreements like this, foreign corporations can come here, set up non-resident trusts, with Canadian owners but not really beneficial owners, and take over our corporations. We have seen that in the last few years. We just saw it last year when Inco was taken over by another foreign company.
If things continue as they are, all our historic corporations, which have added to the country's past, will slowly slip away. CN has its head office in Montreal, but it is just a skeleton. Most of the decisions are made in Chicago. We have lost part of that.
These agreements are important. The government has to realize that when it makes a decision, it has to be an overall decision to protect Canadian interests. Canada's financial markets represent 1% or 2% of worldwide markets. We need to protect Canada's corporations or they will be swallowed up in this international global economy that we live in today.
In the budget just tabled one of the items concerns me when it comes to the international tax system and fairness. Canada and the U.S. apparently have agreed in principle to update the Canada-U.S. tax treaty. They want to eliminate the non-resident withholding tax on interest payments and Canada also plans to unilaterally remove the withholding tax from arm's length interest payments to other countries.
What does that mean? Does that mean we will not collect any money on interest payments that are made to foreign companies? How about having an agreement with the U.S. in this case to ensure that the money will be taxed on the other side? When companies from the U.S. pay Canadians, we can collect our taxes from those Canadians.
The government then says that we need to promote more business investment. We turn around and look at the budget. Budget 2007 proposes to eliminate the deductability of interest incurred to invest in businesses and business operations abroad.
How does that make any sense? The government wants Canadian businesses to buy foreign entities. Does it want foreign entities to buy Canadian businesses? This will eliminate the deductability of interest incurred to invest in business operations abroad.
How will that help Canadians to expand, to go abroad and increase productivity? It will not. I am not sure what the government is trying to avoid here. There is no basis for saying it is going to affect revenues in Canada. Most Canadian companies that borrow to purchase foreign affiliates borrow from Canadian financial institutions. The Canadian financial institutions from what I understand pay taxes here.
Perhaps the government should have put a disclaimer that said if a Canadian business was to purchase an operation abroad, as long as it borrowed the money from a Canadian financial institution, that interest could be deducted.
When other members spoke on the bill, they spoke about income trusts. Income trusts have a non-resident aspect to it. We see now that the rules were changed. Some REITs are still allowed, but the government has put a limit as to how much foreign ownership or foreign property they are allowed to invest in.
In the news it said that Canadian REITs were not allowed to invest in foreign entities or foreign real estate up to a certain level. How will that help Canadian companies if they cannot go abroad? As we say in French, “Les bâtons dans les roues”.
Getting back to income trusts, the government has imposed a 31.5% tax on income trusts, which is fine if it chooses to do that. Now it has totally eliminated that sector because it says it did not pay tax or claimed too much tax. The government keeps flip-flopping in terms of its position.
Now we have income trusts that are now going to have to pay 31.5%. People were interested in investing in income trusts, especially the energy sector, because these allowed corporations to go out and get capital at a cheaper price because they were selling units instead of shares. Then the government decided to implement this 31.5% tax. It said that trusts were no longer allowed to operate as of 2011. Existing corporations cannot be converted to trusts.
What has happened is there are no restrictions for foreign entities to buy these companies and turn them into private entities or private trusts to be controlled by foreign entities? There are no restrictions on the actual way in which incomes trusts can now function.
The Liberal way would have been to tax earnings only, to keep the income trusts and tax the non-residents who benefit from the tax free distribution from these income trusts.
Before I get to my next point on private members' bills, I want to go over the tax treaties. The government has also decided to unilaterally provide U.S. companies to borrow in Canada on these limited partnership payments.
What has happened again, if we look at what is in the news, is these limited partnership entities that are allowed to operate in Canada and are allowed to deduct interest payments in the United States are now going to be able to buy up Canadian companies and get a deduction in the United States as well as here in Canada. The only problem is that Canada is not getting cooperation from the U.S. They will probably be able to deduct the interest here in Canada, buy up Canadian companies and use Canadian capital. There is no consistency in how these fee agreements are treated.
There is a whole page on the interest deductibility on the foreign affiliates. There are going to be a lot of problems when we go through this in the finance committee. We are already hearing that Canadian corporations with foreign affiliates are not happy that they are not able to deduct these payments. These items will have to be dealt with when the budget implementation bill is sent to the finance committee.
There was just one more aspect that I want to talk about. If the government is serious about getting a handle on money offshore or making sure that people are not hiding income from Revenue Canada, there are certain procedures that could be used. Some of the departments here in Canada could monitor these moneys or shifts in large sums of money that seem to go offshore and are not accounted for.
FINTRAC, the Financial Transactions and Reports Analysis Centre of Canada was established a couple of years ago. We just did the five year review so it has been around for five or six years. There are financial institutions that have to report to FINTRAC whenever they receive payments of more than $10,000, so FINTRAC could easily monitor any payments that are going offshore.
The problem is that FINTRAC's basic responsibility is to look at whether sums of money are used for terrorist financing or money laundering. It is for crime proceeds. Tax avoidance does not seem to be within its mandate. This is one of the amendments that I had asked for when we were doing the five year review of its mandate, to see if FINTRAC could look at the way tax avoidance is handled in this country.
Another idea that I had was similar to an initiative which has been done in Europe and a couple of countries. It was to provide Canadians with a once in a lifetime opportunity to declare all their worldwide income, and if they repatriated back here, to charge them something like 10% or 20%, and split that amount with the provinces. It would be a good way to generate some revenue even for the provinces. If somebody had forgotten to declare some money or they happened to have some money in another country, they could bring it back. We could assess a tax of 10% or 20% tax. They would not have to pay any interest or penalties on those sums of money.
This initiative seems to have worked in a few other countries. I do not have the stats but apparently there was a good take on it and it increased government revenues by a good 10% or 15%.
There are other ways in which we can look at how tax havens and tax treaties are handled. A 500 page bill is definitely an interesting way to look at all these complex items. The bill tries to amend the Income Tax Act. The Income Tax Act is one of the more complex pieces of legislation, although apparently, the Employment Insurance Act is much more complex.
These are all issues the government should be looking at. I am looking forward to seeing Bill come to committee so we can analyze it and get a better understanding of what this 500 page document is all about.
:
Mr. Speaker, on behalf of my party, the Bloc Québécois, I am pleased to speak to Bill . I am going to read the title so that the people listening will understand it. This is an Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act.
Now, just from reading the title of the bill, it is clear that it is somewhat complicated, for everyone. This bill is over 400 pages long. I was not joking when I asked my Liberal colleague, a few moments ago, whether his party was for or against tax avoidance, because in the speeches we hear in this House, no one has taken a clear position as the Bloc Québécois has done.
This bill must be passed for the good and simple reason that at present, as we speak, as old age pensions are not being indexed by the federal government, as electricity bills are going up for families in Quebec and probably everywhere else in Canada, as registration fees for car licence plates are going up, as the cost of everything is going up, companies and individuals are using legal entities that are allowed in Canada either to transfer capital abroad or so as not to pay income tax on investment funds. This bill must therefore be passed.
Our position is clear, but we will never stop there. The Bloc Québécois has a single principle: all tax avoidance must be eliminated. It is not acceptable that while some people are having a hard time, others are taking advantage of the situation in order not to pay their taxes here. And then, once those taxes have been collected, we could index old age pensions and raise the various income supports so that people would be able to pay for what they need to survive and meet their everyday expenses.
That is why what some colleagues in this House are saying is incomprehensible. We must never distance ourselves from the public. Certainly this is complex, and we can try, as the Liberal member was just saying, to say that these 400 pages do not solve anything. It is not accurate to say that in 400 pages nothing is being solved. However, he is entirely correct, because tax avoidance is not being solved once and for all. As well, I am not sure that the Liberal Party, which was in power for 13 years, wanted to solve the problem of tax evasion. It did not want to solve the problem, and today, even though the Liberals are in opposition, they will not solve it and they will not do everything in their power precisely to recover all the money that is needed so that we can restore fairness.
I was pleased to hear the say a moment ago that he wanted to try to restore fairness. This is true of this bill, in part, but the Conservative Party has to be logical in what it says, and restore fairness once and for all. The first aspect of fairness that it should have restored was to index old age pensions on April 1, so that at last everyone who has contributed to the growth of Quebec and Canada would be able to receive dividends on all the time, money and energy they have invested and all the taxes they have paid in the last 40 or 50 or 60 years. That has not been done.
It would be even better if we were told today that what will be recovered with Bill will be given to those most in need in our society. Never has a Conservative risen in this House, however, to tell us that money would be recovered so that it could be given to those who deserve it. No, that is not what happens. The money is going to be recovered and that is good. The Bloc Québécois agrees with these measures and supports them. You will have our entire support with regard to Bill and all bills that you propose to eradicate tax evasion once and for all. We will be there to help you, provided that afterwards we can take this money, reinvest it in programs to help those most in need, index old age pensions—as I told you earlier—and be able to reform employment insurance.
With regard to employment insurance, since 1994 the federal government has not invested one cent in the employment insurance plan. It consists of contributions from employers and employees. Believe it or not, the government has managed to generate over $51 billion since 1996, which it has used to reduce the debt and for all sorts of investments, except improving the employment insurance system so that those who have paid into employment insurance are capable of avoiding the famous black hole or seasonal gap, except in a few regions. It is true that the governments, both Liberal and Conservative, have listened to part of what we had to say, since in certain types of industry and in certain regions some pilot projects have been adopted.
The problem is the lack of jobs in all sectors. There have been massive job losses, particularly in manufacturing, in the past two years.
Furthermore no solution has been found for the problem of older workers who have lost their jobs and who deserve an assistance program so that they can enjoy their old age pensions with decent incomes. We have not been able to do that, even though we are swimming in billions of surplus dollars from the employment insurance fund.
All the Liberal and Conservative members will say today that there is no employment insurance fund; it is the government’s consolidated revenue fund. Obviously they collect more from the plan than it costs them, more than they expend on services or insurance for workers.
They make a profit, quite simply. They make money with the employment insurance premiums paid by employees and employers. The reality is that they make a profit. What do they do with the money? They do not give it to the citizens who need it most. They do not improve the plan. We are talking about seasonal workers and workers over 55 who have lost their jobs and who deserve some help until they are eligible for their pensions. We do not see any of that.
There has been no speech in this House, neither from a Liberal nor a Conservative, to say that if we ever passed a bill such as Bill , we could help the least fortunate with that money.
I am not asking that we give this money to those who could benefit from a new employment insurance program. We could simply use the surplus in the fund to improve the EI system. And we could very well use the money saved or recovered through Bill , which addresses tax evasion, to index old age pensions and any other assistance program for the least fortunate in our society.
Once again, and as usual, we are in for a long fight. Those watching us must realize that things do not progress very quickly in the Parliament of Canada. It is a big machine, a big, spacious box with many members and bills that are renewed from one Parliament to the next. Often bills come from previous Parliaments because of elections, etc.
A bill is introduced and then we are informed in this House that the bill did not go through, that we were unable to see it through because we ran out of time and it did not go through all the stages. It is very complicated. However, we must not forget that the party in power often benefits from this, in other words, it arranges things to ensure that the bill does not see the light of day. That is the harsh reality.
We work hard, we try to see bills through, but sometimes the government decides not to pass them quickly. A fast-track procedure exists. Many journalists and media report that we have fast-tracked a bill. What is fast tracking? It is used when we want a bill to pass and we set things up so that it does: we do it quickly and we skip a few stages.
This will not be the case for Bill . The Conservative Party does not want to fast-track. It apparently wants to show an interest in correcting tax evasion.
The Bloc Québécois will give its full support to this bill and any measure seeking to advance the bill as quickly as possible on the parliamentary, jurisdictional, constitutional or any other agenda.
We are prepared to fast-track this bill so that it is enacted as quickly as possible. Why? Because Bill corrects various provisions of the Income Tax Act. These provisions are being corrected because they made it possible to circumvent tax rules and to evade taxes. The bill is 400 pages and is indeed complex.
Some follow what is happening in terms of tax evasion. Major tax evasion trials are often televised. Individuals have been accused of tax evasion and fraud. Do not get me wrong, but it does not constitute fraud because the law allows tax evasion.
Those who avoid tax have often paid consultants, professionals and a whole host of experts. They have a lot of money and they spend a lot of it to have experts find loopholes in the Income Tax Act, enabling them to avoid expenses and paying taxes.
Today, to deal with the problem, we could all just say that if the government wants to solve the problem of tax evasions it should go ahead and do so. More than 400 pages is needed just to correct some small paragraphs in each amendment. I will not read them all, unless I have the unanimous consent of the House to continue speaking until next week, which I will certainly not obtain.
Be that as it may I would gladly list the sections, paragraphs and sub-paragraphs that have been amended by this bill. In the end, the objective is quite simply to make it more difficult to circumvent the tax regulations and to avoid paying taxes.
The bill responds to the shortcomings identified by the Auditor General in her 2005 report.
It often happens that, here in Parliament, we need the Auditor General to tell us things that we all know. We know that there is tax avoidance in Canada. Cases are reported in the media. People find it maddening that investment money can be legally transferred to other countries without being taxed in Canada. In order to verify that a request was made to the Auditor General. In 2005, in her report, the Auditor General raised the very problem we are trying to rectify today.
The bill before us today will require disclosure of additional information about foreign trusts, which will allow a more rigorous analysis of the figures submitted to the Canada Revenue Agency, in accordance with the recommendations of the Auditor General.
This means data will have to be up to date in order to have all the required information. That is also complicated. We would be hard-pressed to find out how the money was moved, as was the case with trusts; where the money went; where it came from and all the rest. The government absolutely must adopt legislation to control that because, as I said earlier, the big financiers and all those who want to take advantage of the loopholes in the act can hire any number of professionals to help them.
The Auditor General said that this has to stop and that all the required information must be provided. The bill requires that foreign trusts and foreign investment groups must provide all the information required so that we can curb tax avoidance and put an end to it.
I listened to my Liberal colleague earlier and what seems to be the Liberal philosophy. They say they want to put an end to tax avoidance and go after the money offshore so that people pay the taxes they owe. That could take a long time because the money is already gone.
This bill at least has the advantage of allowing the money to be collected before it leaves. That is a good thing in itself. We agree with collecting money that is already in other countries and has not been taxed. We have said that we support any regulations or amendments to the bill for the purpose of recovering taxes from people who have not paid them. But let us start with Bill to collect taxes from people who want to send their money abroad. We know about foreign trusts, and about all of the foreign investment bodies and entities that transfer capital, and that should be declaring it. We will therefore be collecting the tax right at the start. That is the primary objective that this bill adopts and that the Bloc Québécois adopts.
Tax evasion is much more complex and significant than it appears. This is a principle of fairness. People have to pay their taxes on the money they earn, in Quebec and in Canada, on their sales or however they get it.
When someone sells a car, or a household item, or shares, or whatever, the Income Tax Act allows for exemptions, and that is good because it encourages investment. However, apart from those exemptions, once everyone has understood that after so much profit, they have to pay income tax, this is a simple principle of fairness. In order to redistribute wealth better, we must be able to collect all of the money owing.
We have to stand up. On the day when a government stands up tall, it can tell everyone that they have to pay their taxes, as the law requires them to do, and there will be no more tax evasion or signing of agreements with countries like Barbados, as was done in the past. We denounced the agreements with Barbados, which also allowed the to transfer capital to foreign countries. We have already said a lot about that here in Parliament. This has to stop.
On the day when this message is sent, businessmen will understand that when they make profits, they pay taxes. Our problem is that we allow them to do things and we open the doors that they use. They pay professionals so they can use those doors. On the day when we stop and say that it is over, because we want to have fairness, we will require that they pay their taxes. Because the profits they make are thanks to all the taxpayers who make a lot of corporations wealthy. They often try to make even more profits. We can name them. We saw them when we were talking about income trusts. They are banks and companies that we are dealing with today. Even Bell Canada wanted to create a trust.
One day, we will say to all of them who tried everything they could to make their shareholders wealthy from dividends every quarter, that they have to pay their taxes as they should, and that after that has been done, they will pay dividends. That is it. Dividends will be a little lower, but they will have paid their taxes. When that time comes, the government will be able to resolve the fiscal imbalance once and for all, as we are calling on it to do, not half of it or part of it.
Yes, the Bloc supported the government because it fixed 60% of the fiscal imbalance. But maybe if it recovers all that, it will fix 100% of the imbalance. It will index the old age pension, as it should have on April 1. Maybe it will take a look some day at what an old age pension cheque is supposed to cover. Maybe it will look not only at the cost of living but more at the cost of medications for older people.
It will also look at the cost of housing. Safe housing, including services, is getting more expensive. But the pension has not been indexed for the last 10 years. We have never taken time to discuss the cheque received by older people. Is it really suited to the current needs of our older people, who find that it is getting more expensive to find safe housing. There are a lot of home invasions and people need housing with good security. Are we there yet? No, and we know it. The old age pension was not even indexed on April 1, and it will not be. People who did not know that know it now. I think that most people have already received their cheque and they know that it was not indexed.
In my view, there will have to be a debate some day and the richer people in our society will have to be told that they already have enough and are wealthy enough. They should therefore pay their extra share in taxes. After all, they are not losing all their perks. Corporations and trusts have their own tax rate, which is much lower than the individual rate. They already benefit from the largesse of the system. They already have their ways of saving a few bucks. They will just not get any additional gifts.
The problem is that people who make a lot of money cannot be prevented from wanting to make even more. When people find that the door is wide open and they can detour their funds through foreign trusts and invest their money tax-free elsewhere, why would they not do so, when they can see that their neighbours are doing it?
The income trust story is something like that. The Conservatives are now wrestling with a promise they did not keep and the Liberals with a promise they probably should not have kept. Why? Because originally it seemed like a good idea. But when everybody took advantage of it, they realized that if it continued, one day the big companies would no longer be paying any tax. All of that because they created a little loophole in the Income Tax Act to try to help out. That was done by lobbyists.
We often hear our colleagues tell us that MPs should no longer be there and that lobbyists should take our place. Income trusts have led to this. Lobbyists probably treated members and ministers to lovely evenings with a bottle or two where they had some fine chats about the future. However, lobbyists work for banks and large corporations. They try to find ways for them to make more money. Meanwhile, ordinary citizens sit in front of their televisions and may no longer be able to pay for a meal out. That is difficult to reconcile.
The Conservatives rise to tell us that the Bloc Québécois should disappear. We now have lobbyists. So, all MPs will be replaced. Members will all belong to the same party and the lobbyists will become the official opposition. That will be great, right? That will be just great. Usually, lobbyists do not speak or ask questions in public. Everything is done behind closed doors in order to obtain results.
So, that is how the Conservatives want to govern, and the Liberals before them were not much better. That is the harsh reality. We have allowed lobbies to take over Parliament. It is one of the hard realities faced by new members and they are aware of it.
We receive dozens, even hundreds of invitations every month from various lobby groups trying to take our place as politicians. Personally, I think it is quite something that we have let them take over. Today it has become such a part of daily life that members of the Conservative Party say that there should be no opposition members; the lobbyists will do their work for them. Well, that is how it is. That is what they want because they can be controlled and they have the money to buy them.
One thing is certain: you cannot buy members of the Bloc Québécois. We will always defend a bill, such as Bill , that makes the rich pay their fair share in order to distribute it to those most in need.
:
Mr. Speaker, I am happy to join in this debate on Bill on behalf of the NDP caucus. In doing so, I would like to recognize and pay tribute to the work that our finance critic for the NDP caucus, the member for , has done in this regard.
Many of the provisions that we will find in Bill were actually dealt with in the last Parliament. Many people on that committee worked on many of these details and find them wrapped up in this omnibus package that we see today.
Let me say, as a relative layperson in regard to these matters of high finance, that my first observation as a dumb carpenter is that I find this volume almost mind-numbingly complex. My first observation as a Canadian taxpayer is that I lament the fact that our tax system is becoming increasingly complex, to the point that every time someone seeks clarification or points out a shortcoming in the tax system it seems to add another layer of complexity, to the point that we get 500 page documents like the one we are dealing with today, which we will add to the volumes and the libraries of pages that already have been written on this tax system.
Just as an aside, I have been going through some boxes of documents belonging to my parents. As we were editing through them, I found an old tax form of my father's from 1950. It was one page long. In fact, it was one-half of one page, and it asked how much he earned. Then it had a line for how much the tax would be. Then one would sign it and send it off. Well, we have come a long way, baby, since those days of a relatively straightforward, understandable tax system that the average working person could actually understand.
We have heard a lot about tax cuts in recent Parliaments. In fact, it has been the flavour of the month not only in this country but throughout developed nations. We hear more about tax cuts than we hear about tax fairness. That is what I would like to focus on today.
Our tax system is not supposed to be rigged like some shady ring toss on a carnival midway, but that is how some of us feel sometimes, in that as the system gets more complex it is to the advantage of the privileged few who can manipulate it and use it and take advantage of the opportunities that are deep, deep within this tome, this incredible volume. The rest of us are lucky if we can take advantage of an RRSP or an RESP with whatever extra capital or cash we might have that year.
The fact is that the increasingly complex tax system we are seeing, added to again here today, is still missing basic elements of tax fairness, things that we could have addressed long ago, things that have been raised time and time again by our finance critic and others within the NDP caucus. There are gaping loopholes that cost us an enormous amount in lost revenue and there are great shortcomings that result in lost opportunities for ordinary working people. Again, that does not do us any favours.
The just presented a massive budget. We were optimistic that some of these glaring loopholes would be addressed in that budget. I actually thought I heard the talking about tax havens, for instance, and about making every business pay its fair share of taxes. I thought I heard him say that we were going to lower corporate taxes but insist that all businesses pay at least what corporate taxes are left.
However, I was shocked to learn just recently that it was all smoke and mirrors. When we read the references to offshore treatment of tax treaties and tax havens, we learn that these loopholes are not plugged. It is all the same. It is just like it was.
Honestly, the views Canadian taxpayers the way P.T. Barnum viewed circus-goers, I think, because in analyzing the budget, the satisfaction is not there. It is a lost opportunity along a theme that we have adopted in our caucus. I would like to talk about this.
Our tax system is the instrument or mechanism by which we can implement fairness in the way that we redistribute wealth, so to speak, in this country. What we have identified in our caucus is that there was a deal in the post-war years, a labour accord, such that when profits are up and productivity is up, workers' wages and standards of living are supposed to go up. It was a tacit agreement between capital and labour that resulted in a generation of labour peace and productivity.
That compact has been broken. This is what we find. If we were graphing or charting productivity and profits, we would see that workers' wages and families' standards of living were not going up in any kind of corresponding way. If there ever was such a deal, it did not survive. It got violated. It has been compromised. It simply does not exist.
There is a prosperity gap. We are not sharing in an equitable way the prosperity of this great nation. Our tax system is perhaps the most effective instrument that we have to address that shortcoming.
As for when we do put all of the eggs in one basket in terms of addressing some of the inequities, let me point out some reading that I have been doing. There is a disproportionate amount of wealth in one category. I have some interesting figures that I would like to share with members.
One figure is that 1% of the population owns 47% of the stocks and shares on a market value. The remainder of 4% is the bottom quintile of shareholders. When we are addressing only the advantage for a certain segment, we are not redistributing wealth in any meaningful way.
One of the shortcomings that we would point out on this issue of tax havens is that we are not even trying as hard as some other developed nations. In the United States, for instance, even though the Americans have not outlawed tax havens altogether, they are certainly becoming aware of the problem and the revenue loss in allowing this to carry on.
In California, for instance, the state will not do business with any company that is sheltered offshore. In other words, tax fugitives may make the choice that they are going to shelter their companies offshore to avoid paying their fair share of taxes in their home country, but they are not going to get any contracts with the government.
We note that one company that has been in the newspaper recently as a tax fugitive, seeking to avoid paying its fair share of taxes in Canada, is Merck Frosst. Merck Frosst, by some happy coincidence, just benefited enormously by this budget. The budget just introduced by the announced a $300 million program for vaccinations against cervical cancer.
While this on the face of it is a laudable idea, there is only one company in the country that can provide that vaccine against cervical cancer, at approximately $300 per unit. That company is represented by Ken Boessenkool, a well-connected lobbyist who was formerly a senior adviser to the . Is that a coincidence? We do not know, but it certainly is a very fortuitous situation for Merck Frosst, a tax-sheltered company that is taking part in these offshore tax havens.
Nobody has been able to assess the full impact of allowing this tax fugitive or tax haven or tax-motivated expatriation to carry on. In the United States, the Americans estimate it at about $70 billion a year of lost revenue. If we go by ratio and proportion, perhaps we are 10% of that. Perhaps it is only $7 billion a year that we are knowingly and willingly allowing to fly out of the country, but that is a significant amount of change in a period of time when we have seen budgetary cutbacks in key social programs that are nickel and diming us on issues, whether it is literacy or status of women offices. The government is willingly watching that amount of money fly out of our national revenue.
We do not understand it. We do not understand why the government continues in this vein, especially at this point in time when we actually thought that in this budget it might be addressed because the one high profile example that I believe stopped the previous government from addressing tax havens should not be an issue for this government. If the previous government was unwilling to step on Canada Steamship Lines' toes, I do not know why this government would have that same hesitation.
Setting up these shell companies in a tax haven to take earnings from Canada, filter them through a dummy company and call them expenses through that company, I do not know how we can allow it on moral and ethical grounds if we are at all concerned about that, but those people who do operate that way are not in very good company.
Enron had 881 offshore tax havens and dummy shell companies. I do not think they moved any of their production there because they did not need to. There is convenient assistance being marketed on the Internet for anybody who wishes to undertake an offshore tax haven. I pulled off only one as an example, just to show and share with other members of Parliament the type of language and the type of sales pitch that goes on, and what is featured here if we allow it to carry on.
One company called Offshore Companies House is a resource that corporations can look to. It states: “We have many services available from which a client may choose”. For immediate use, we could buy into an offshore shelf company or off the shelf vintage companies. The offshore shelf companies are clean and have never held a bank account. They are 100% tax free and clean, but they also offer the ability to funnel our activities through what they call a vintage company, which is already established.
It says that due to unpleasant changes in legislation and tax policy, some of the offshore tax havens are no longer recommended: Cayman Islands and Switzerland, for instance. It recommends some others that have come on board. Belize, Dominica, Seychelles, Panama, Gibraltar and Barbados are in fact recommended as convenient places where we might shelter our company's activity if we choose to be a tax fugitive or engage in this offshore expatriation of our obligations.
It seems to me a missed opportunity, when we open up the Income Tax Act, to not address some of the most glaring issues. I do not who got to the government. I do not know who convinced the current government of the day that it should not avail itself of this opportunity and plug this unbelievable loophole.
It is not as though the government is not aware of it. I have heard Tory members in the last Parliament rail about this, in fact. Now two budgets have gone by and the government has chosen not to plug this idea. It has tinkered with it enough to where the can say that he has addressed the issue, but the government certainly has not put a stop to it.
For instance, part two of Bill enacts provisions to implement announcements made by the finance minister on September 18, 2001, limiting the tax shelter benefits to a taxpayer who acquires future business income of another person, and on October 7, 2003, to ensure that payments received for agreeing not to compete are taxable. A number of these things are not directly applicable. They are simply dealing with tax sheltering, tax exemptions, et cetera.
I am concerned, though, about the issue that was raised by previous speakers in debate that we are also silent on the idea that foreign capital is gobbling up Canadian corporate entities and institutions. This is something that used to be debated with great passion in the House. When I look back over the years, people like Walter Gordon and others in the late sixties and early seventies were fiercely proud Canadian nationalists. They were horrified that a lot of our Canadian businesses and corporation, institutions really, were being bought up.
The government put measures in place where there would have to be a mandatory review of these foreign takeovers to make sure that allowing them to go ahead was in the interests of Canadians.
I cannot find a single example where the Canadian government has ever put the brakes on or said no to one of these foreign takeovers to the point where 80% of businesses in this country are now foreign controlled. I believe that figure is even higher now because that number is a couple of years old.
I am just wondering where the oversight is. Who is minding the store as our Canadian businesses get turned into branch plants, satellites of larger foreign corporations that may or may not have the same interests and loyalty to our best interests?
I am not saying that capital has a conscience. We do not expect these companies to conduct themselves any differently just because of any affinity or love for this country. Those of us in the House of Commons have a love for Canada. We have an affinity for Canada. We want what is best for this great nation.
Somehow there has to be some intervention or some oversight. There needs to be a better accounting of whether these takeovers are in fact in Canada's best interests. Somehow that fell by the wayside to the point where it became unpopular in the era of globalization to put up any barriers or boundaries in terms of takeovers or acquisitions. That was a mistake. We were on the right track when we were putting our foot down. We have seen other countries do it.
It is not only foreign corporations that could be taking over our companies, but foreign nations, state controlled companies. Is it a good idea to let China buy our resource companies? We better give that some serious thought because our precious natural resources are our birthright as Canadians and they may wind up in foreign hands. We would lose control of those resources and we would not be able to steer the industry sector toward our own best interests.
These are concerns that come to mind as we delve into this weighty bill of 500 pages, Bill . The amendments in relation to foreign investment entities and non-resident trusts would add layers of complexity rather than clarity to our income tax regime. Ordinary Canadians would like to know first and foremost if we are acting in the best long term interests of Canada and Canadians, and not pandering to other interests. We on this side of the House are concerned that our tax system is operating to the advantage of a few but maybe not all.
There is an English folk poem that I came across in my research for my speech which says:
They hang the man and flog the woman
That steal the goose from off the common,
But let the greater villain loose
That steals the common from the goose.
That was great wisdom in 1764. I am not sure that we are not allowing this kind of same mentality to drive us today.
I found great insights in this book that I have quoted from. It is called Pigs at the Trough by Arianna Huffington, a woman in the United States who was once married to a billionaire. She went through a nasty divorce and ended up telling a lot of secrets out of school about how billionaires conduct themselves. This book gives great insight into how the tax system is manipulated to benefit the wealthy.
We do not really know what is going on. It does have some interesting recommendations. One of which I will restate here for the record, “I believe that any Canadian company that is engaged in tax motivated expatriation, [in other words tax havens, tax avoidance] should be cut off from any government contracts. They should not even be on a pre-qualified list to bid on whatever it may be”.
The Government of Canada is a large consumer of many types of goods and services. There is a choice. If the government is not going to plug the loophole and keep allowing the loophole, then it should at least cut off the tax fugitives. They should not be allowed to bid on any government contracts. That is what California has done to Ingersoll Rand and some of these companies.
:
Mr. Speaker, I need your help because that is the way the ad is written. However, I will use his title, the .
The add reads, “[The Prime Minister]'s word is worthless. Just ask 2.5 million Canadian who own income trusts. [The Prime Minister] garnered votes in the last election by promising not to tax income trusts. He promptly reneged on that promise and the process wiped out $35 billion in Canadians' life savings. He then refused to disclose his analysis behind this policy reversal. If [the Prime Minister] wants a majority, then it's time he started listening to the majority”.
Here are the results of an Angus Reid poll. What part of this poll does the Prime Minister or indeed the Minister of the Environment not understand?
“Was it right for the Prime Minister to break his promise?”
In view of the information provided by the government to date on the tax effect of income trusts, and given the material loss of retirement savings by income trust investors, do you personally believe it was right or wrong for [the] Prime Minister...to break his election promise concerning income trusts?
The Angus Reid poll showed that 70% of people said that it was wrong, which is way beyond the magic 40% that the is looking for. The poll asked: “Is the Prime Minister a leader or is he a misleader?”
The ad goes on to state, “Just ask the premiers of Saskatchewan, Nova Scotia, Newfoundland and Labrador”.
There is a saying in the House that if there is still discussion about the budget 48 hours after it is presented, it is a bad budget. Here we are, 10 days after the budget, and the government has irritated beyond belief the premier of Newfoundland and Labrador to the extent that he takes out national ads. He has a lawsuit from the premier of Nova Scotia. The folks from the income trusts have taken out an ad. The premier of Saskatchewan is also upset.
The promised not to include oil and gas revenues in the equalization formula. It turns out his word is worthless. The constituents in Scarborough—Guildwood actually write and tell me this. I think the would be interested in knowing what they said. In fact, I will share with him my e-mails any time he wishes to see them. It appears Canada has a budget deficit. It is a deficit in integrity.
The premier of Nova Scotia, Rod MacDonald, had this to say, “Very disappointed. It's an agreement that we signed, an agreement that we expected our federal government to uphold”.
The premier of Newfoundland and Labrador, Danny Williams, had this to say, “What they've done today is basically completely shafted us”. He said that Newfoundland was very disappointed at being betrayed.
It is really quite extraordinary that on the same day the premier of Newfoundland takes out a full page ad in national newspapers and quotes a Conservative pamphlet distributed during the election. The pamphlet states:
There is no greater fraud than a promise not kept.
No small print. No excuses. No caps.
On March 19, 2007, in his second budget, the right hon. broke that promise. It was a promise that he made in a pamphlet. He stood on two election platforms and said it to our faces. I see the is going crazy because he realizes that everything that the premier of Newfoundland says is true. He wrote in letters over and over again that it was a simple, unequivocal promise and he broke it.
The understands that completely, which leaves us--
An hon. member: Because he is part of the problem.
Hon. John McKay: Indeed, he is part of the problem.
It leaves us with a simple and unequivocal question: What does that leave us, not just the people of Newfoundland and Labrador, but us, we the people of Canada? If we cannot accept at face value the promise of the, then who can?
Can the people of the Atlantic provinces or Saskatchewan or, yes, even the people of British Columbia and Alberta accept his promise, because all have had promises made to them of one sort or another? All of them should be now asking what those promises are worth. A promise made should be a promise kept and, as the pointed out, there is no greater fraud than a promise not kept.
Then our will not keep a promise as simple as the one he made to us. It is not just the people of Newfoundland and Labrador who lose. We all lose.
When we are talking about tax fairness, Canadians should beware when the government talks tax fairness. If two ads in the national newspapers are not enough, then the premier of Saskatchewan piles on with his outrage. What we have is a Prime Minister so bent on his partisan agenda that he is willing to throw out a promise he made to Premier Lorne Calvert and the people of Saskatchewan and, by the way, other Canadians.