|| That, given the government loses tens of billions of dollars annually to tax loopholes, deductions, and exemptions that mostly benefit the wealthy and estimates suggest that tax evasion through the use of offshore tax havens costs the government more than $7 billion dollars annually, the House call on the government to: (a) address tax measures that primarily benefit the wealthy, including keeping its promise to cap the stock option deduction loophole; and (b) take aggressive action to tackle tax havens including (i) tightening rules for shell companies, (ii) renegotiating tax treaties that let companies repatriate profits from tax havens to Canada tax-free, (iii) ending penalty-free amnesty deals for individuals suspected of tax evasion.
He said: Mr. Speaker, I would first like to inform you that I will be sharing my time with the always very diligent and meticulous member for . It will be my pleasure to give him the floor on this fundamental issue. I do not think I have ever discussed an issue with such serious consequences on the state's ability to provide services to Canadians.
I think it is now fair to say that we no longer live in a fair and equitable tax environment that works well for our workers, those less fortunate, and the poorest families in our country.
Let us put things in context. We live in a society where every year we hear the same old story: by noon on January 2, CEOs of major Canadian companies have already earned as much in a little over 24 hours as an average worker will earn for the entire 365 days of the year. It is this type of inequitable society that the successive Conservative and Liberal governments have built over time.
Two billionaire Canadians have as much money as the poorest third of the population. Two people alone have the equivalent of what 12 million people have in our country. Are we supposed to just accept that and move on? The highest paid CEOs in Canada earn 193 times more than the average salary and the gap has only gotten bigger over the years.
A number of things explain this increased inequality. According to the Gini coefficient, which measures inequality, for a decade now, inequality has been growing at a much faster rate in Canada than in the United States, a society often considered to have greater inequality. Inequality is growing faster here than there. How did that happen? What caused this to happen? There are several reasons. In his book Une escroquerie légalisée, Alain Deneault provides a list of reasons that is impressive, but not comprehensive.
First, there was the reduction in federal corporate tax rates, which dropped from 37.8% in 1981 to only 15% in 2012. Next, the federal capital tax was eliminated. Then, the federal capital gains inclusion rate was cut from 75% to 50% in 2000. I will come back to that. We could also mention the sales tax and duty exemptions, and the fact that some companies can indefinitely defer payment of their taxes. Well, imagine that! Let us attempt to do the same with our T4 slips in just over a month's time, see how that goes. Let us not forget that some mining and oil and gas companies can be set up as non-taxable income trusts, and that tax rates for Canadian taxable assets owned by non-residents are declining.
This is not an exhaustive list, but it does show that over the years the trend has been to systematically favour big business and the wealthiest in our society to the detriment of those who receive a pay cheque every two weeks and are required to pay their taxes in order to receive, incidentally, fewer and fewer services.
One thing that is not on that list but is nevertheless a reality is the phenomenon of people sending money to tax havens to avoid paying their fair share of taxes here in Canada. Were that tax money collected, it could be used to provide social programs and social housing, improve public transit, provide care for the elderly, and help students take on less debt. We are losing billions of dollars because that money is being sent to a bunch of sunny tax havens. It is hard to put a number on exactly how much is being lost. It is kind of frightening.
What is more, the problem is exacerbated by all of Canada's bilateral tax treaties, such as the one we have had with Barbados since 1980. Since then, Canadian direct investments in Barbados have increased by 3600%. Canadian businesses and individuals sent $130 billion to Barbados in 2011. Two years later, $170 billion was sent to Barbados and hidden there. Why?
This happened because we foolishly agreed that, if people paid their taxes in Barbados and reported their earnings in Canada, they would no longer have to pay taxes in Canada. It is the principle of the avoidance of double taxation, under which people do not have to pay taxes on the same income in both countries.
There is just one small problem: in Canada, the corporate tax rate is 15% and the individual tax rate is approximately 25% or 30%, whereas in Barbados, the tax rate is 1% or 2%. Obviously, that is nothing. People are paying their taxes in Barbados and reporting the income here in Canada. It is completely legal. There is nothing that can be done about it. Billions of dollars are being lost every year. That is why the NDP's motion proposes that all of the bilateral tax treaties be reviewed and renegotiated. These treaties are obvious scams that are depriving us of necessary resources and giving gifts to those who do not need them. It is rather mind-boggling.
Canadian investors invest four times more in Barbados than in Brazil. Looking at total Canadian investments, twice as much is invested in about 10 tax havens than the total invested in China, India, and Brazil—growing countries where we need to be present.
All of these multinationals are profiting from crime. They are now responsible for 40% to 60% of international economic transactions, transactions that are taking place between the same companies and their subsidiaries. They are what is called shell companies or dummy corporations, and their sole purpose is to move money to a certain address via a certain country. They are also called PO box companies. They are empty shells that produce nothing, or are sometimes paid to manage a company’s branding or logo. We have seen millions of dollars being paid to manage a logo. I would like to be able to do that.
This has created totally absurd situations where all these dummy corporations, all these PO box companies, are often accommodated in the same place. I have one good example: in Georgetown, in the Cayman Islands, there is one building in which 18,000 companies are registered. In fact, the Cayman Islands have more registered companies than inhabitants, making their population the most entrepreneurial in the world. And the tax havens or shell companies do not exist only in the southern hemisphere. In Delaware, in the United States, the Corporation Trust Center houses no fewer than 250,000 companies on its premises. Now that is quite a number.
I have spoken a little about the tax havens, which make up a large part of the problem. Statistics Canada estimates them at $7 billion or $8 billion. The Conference Board of Canada says it is probably more like $47 billion, while Canadians for Tax Fairness cites $80 billion. The range is huge, but in any case it is a lot of money.
The other thing we would like to talk about is the Liberal promise to put an end to certain tax loopholes, particularly stock option deductions. This was a promise made during the election campaign that unfortunately has been totally forgotten.
All these tax loopholes were examined by the Canadian Centre for Policy Alternatives in November 2016. That study has some absolutely incredible things to tell us. When we add up all these deductions, all these tax loopholes and all these tax credits, the shortfall to the public purse comes to $103 billion. Every year, about one hundred billion dollars eludes our coffers, money we could be using to care for our seniors, to treat our sick, and to have roads that make some sense. They examined 64 tax measures that constitute exemptions or deductions. Of those 64, only five are progressive; the other 59 are regressive. What does that mean? For a tax measure to be progressive, one assesses whether most of the benefit of the measure goes to the 50% poorest or the 50% wealthiest Canadians. Only five tax measures benefit the poorest, while the other 59 benefit the wealthiest. In certain cases, such as that of dividend tax credits, it is the wealthiest 10% who benefit, as much as 91% and 99%.
The Conservative and Liberal governments pulled off something absolutely incredible—they created a tax environment called Robin Hood in reverse. All of us together are going to chip in and subsidize the wealthiest.
Mr. Speaker, I am happy to take the floor after my colleague from . 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 , 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 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.
Mr. Speaker, first of all, I would like to thank my colleague from for moving this motion today.
I am pleased to address the issue raised by the hon. member for . I would like to state unequivocally that the Government of Canada is committed to ensuring that the tax system is fair to the middle class. We believe that Canadians must pay their fair share of taxes. That is why, after our government came into office in fall 2015, one of our first actions was to increase taxes for the wealthiest Canadians in order to reduce taxes for the middle class.
Specifically, the government reduced the second personal income tax rate to 20.5% from 22%. In addition, only those individuals earning the highest incomes in Canada, or the richest 1%, should pay more taxes after the introduction of the new 33% tax rate for individuals earning over $200,000. Since January 1, 2016, nearly nine million Canadians have seen more money in their pockets as a result of the middle-class tax cut. Not only was this a good thing to do, but it was also the intelligent thing to do for our economy.
The tax cut for the middle class and the measures that go with it have helped make the tax system fairer to ensure that Canadians can succeed and prosper in their lives. Single individuals who benefit from the reduced second personal income tax rate will see an average tax reduction of $330 per year, while couples will see an average tax reduction of $540 per year.
At the same time, the government returned the tax-free savings account, or TFSA, annual contribution limit to $5,500 from $10,000, effective January 1, 2016. Returning the TFSA annual contribution limit to $5,500 was in line with the government’s objective of making the tax system fairer and helping those who need it the most.
When other registered savings plans are taken into account, the $5,500 contribution limit will enable most taxpayers to meet their ongoing savings needs in a tax-efficient manner. Furthermore, indexation of the TFSA annual contribution limit was reinstated so that the amount will retain its real value over time.
We have also taken action to improve the child benefit that Canadians receive. In our 2016 budget, we implemented the Canada child benefit, which is completely tax-free, in addition to being simpler and more generous than the old benefit system it replaced.
It also does a better job than the previous system of targeting the people who most need it. I firmly believe that the many parents who receive this greatly needed assistance agree with me. Thanks to the introduction of a much better-targeted Canada child benefit, about 300,000 fewer children will be living in poverty in 2017, as compared to 2014. This represents a nearly 40% drop in the child poverty rate since 2014.
Since the Canada child benefit was introduced in July 2016, nine out of ten families are now receiving more money than they did under the previous system, or nearly $2,300 more on average in 2016-17. Parents with children under 18 will receive annually up to $6,400 more per child under age 6 and $5,400 more per child aged 6 to 17.
Whether these additional funds are used for things like buying school supplies, covering part of the family grocery bill, or buying warm coats for winter, the Canada child benefit helps parents cover the high cost of raising their children.
As announced in budget 2016, the government is currently conducting a comprehensive review of the federal tax expenditures. It is doing so in recognition of concerns that have been expressed regarding the efficiency, fairness, and complexity of the tax system. The objective of this review is to ensure that federal tax expenditures are fair for Canadians, efficient, and fiscally responsible for all. External experts have been engaged to provide advice to the Department of Finance. This approach ensures the review is informed by a range of perspectives.
I can assure all hon. members that the government remains committed to ensuring federal tax expenditures are doing what they are meant to do and that they are doing it to help middle-class Canadians. In addition, the government is committed to strengthening efforts to combat international tax evasion and avoidance, and we have taken, and will continue to take, this important step and actions to do so.
These efforts help protect the revenues base and give Canadians greater confidence that the system is fair for everyone. Canadians work hard for their money, and the majority of Canadians pay their fair share of taxes. However, some wealthy individuals participate in complex tax schemes to avoid paying their fair share of taxes. This is unacceptable, and it needs to change.
The Government of Canada is working hard to crack down on offshore tax evasion and aggressive tax avoidance in order to ensure a tax system that is fair and responsive for all Canadians. In budget 2016, we invested $444 million over five years for the Canada Revenue Agency, better known as the CRA, to crack down on international tax evasion and combat tax avoidance.
These investments by the government are enabling the CRA to hire additional auditors, develop robust business intelligence infrastructure, increase verification activities, and improve the quality of its investigative work. These new investments to support the CRA's effort to crack down on tax evasion and combat tax avoidance are expected to generate around $2.6 billion in taxes over the next five years.
In April 2016, the offshore compliance advisory committee was created to advise the and the CRA on strategies to combat offshore tax evasion and avoidance. However, we also recognize that assessing tax revenues alone is not enough. Once we do an assessment, we need to be able to collect the unpaid amounts. That is why budget 2016 invests an additional $351.6 million over five years to improve CRA's ability to collect these outstanding tax debts.
Canada has been a very active participant in international efforts to address tax evasion. Canada is an active member of the Global Forum which was established to ensure that high standards of transparency and exchange of information for tax purposes are in place around the world. Canada has developed an extensive network of bilateral tax treaties and tax information exchange agreements which provide for the exchange of information that could be extremely critical in investigation processes.
Another international development with regard to addressing tax evasion is the new common reporting standard developed by the OECD and endorsed by the G20 leaders. The standard provides a framework under which information on financial accounts in a country held by non-residents will be automatically shared with tax authorities of the jurisdiction in which the account holder is a resident. Legislation has now been adopted to implement the common reporting standard in Canada, starting July 1, 2017, joining more than 100 other countries.
With our partners in the G20 and the OECD, Canada has been an active participant in the multilateral project to address base erosion and profit shifting, BEPS. BEPS refers to aggressive international tax-planning arrangements undertaken by some multinational enterprises to inappropriately minimize their taxes. Budget 2016 announced a series of actions Canada is taking to implement recommendations from the BEPS project.
First, Canada has enacted new legislation to require country-by-country reporting for large multinational enterprises. Second, the CRA is applying revised international guidance on transfer pricing. Third, we participated in international work that developed a multilateral instrument to streamline the implementation of treaty-related BEPS recommendations, including addressing treaty abuse. Finally, the CRA is undertaking a spontaneous exchange with other jurisdictions of certain tax rulings.
Going forward, the government will continue to work with the international community to ensure a coherent and consistent response to the BEPS. The government is also taking action in other areas to protect the integrity of Canada's international tax rules. In particular, budget 2016 introduced measures to extend the application of the income tax back-to-back loan rule to royalty arrangements, and to prevent unintended tax-free cross-border distributions of capital to non-residents.
The government has also agreed to strong standards in support of corporate transparency in both the Financial Action Task Force and the Global Forum on Transparency and Exchange of Information for Tax Purposes.
I would like to point out that the proceeds of crime—also known as money laundering—and terrorist financing regulations include requirements for the collection of information on beneficial owners of corporations. Furthermore, the government recently took action to enhance corporate transparency by prohibiting the use of bearer shares.
I would now like to draw attention to some of the government's investments that provide a great many Canadians with more equitable opportunities for success.
Last June, the government reached a historic agreement with the provincial governments to improve the Canada pension plan. This agreement followed a review conducted by the Department of Finance to determine whether families approaching retirement were adequately prepared for retirement.
Finance department officials found that around one in four families approaching retirement, namely 1.1 million families, may not save enough to maintain their current standard of living. This is very troubling. Middle-income families are the most at risk. Families with no workplace pension plans are at an even greater risk of not saving enough for retirement. In fact, a third of those families are at risk.
The government is aware of the need to help Canadians invest more. Armed with a higher level of savings, they would be able to more confidently envision their future and their ability to enjoy their retirement years with dignity.
Our government is particularly concerned about the situation of young Canadians, who are likely to be more exposed to market risks and, in most cases, will live longer than previous generations. Young people are faced with the challenge of trying to save enough money for retirement at a time when fewer of them can expect jobs that come with a workplace pension plan.
In short, the actions that our government has taken reflect our commitment to helping the middle class and those working very hard to join it.
In this context, the government firmly believes that the best way to increase prosperity for more Canadians is to invest in today's economy. This is why the government has made targeted investments totalling $50.2 billion over six years as part of budget 2016. These investments will ensure stronger growth right now and increase the long-term growth potential of the Canadian economy.
We have forged ahead in the knowledge that when Canadians achieve their full potential they can build a better life for themselves, their families, and entire communities. In doing so, they are building a better and stronger Canada for current and future generations.
As Canada's population ages, our prosperity will increasingly depend on young Canadians getting the education and training they need to prepare them for the jobs of today and tomorrow. That is why, in budget 2016, we increased the Canada student grant amounts for students from low- and middle-income families, as well as part-time students. As a result, more than 360,000 students across Canada will receive more assistance to pursue their education.
We are also working with provinces and territories to expand eligibility for Canada student grants, so that even more students can receive non-repayable assistance.
What is more, under the youth employment strategy, the government invests more than $330 million each year to help young people gain the skills and experience they require to find jobs. Our government has taken action to build on this investment and strengthen the youth employment strategy with an additional investment of $165.4 million in 2016 and 2017. These investments will increase the number of youth who can access the skills link program, which helps young Canadians overcome barriers to employment. It will also create new green jobs for youth and help support employment opportunities in the heritage sector.
Canadians are among the most highly educated people in the world, placing at the top of all members of the Organisation for Economic Co-operation and Development for post-secondary education attainment. More than half of Canadian adults have a post-secondary degree.
We are world renowned for scientific research and discovery, and we can often be found on the cutting edge of clean technologies emerging right now on the world stage.
We have an abundance of natural resources, outmatched only by our greatest resource, and that is our people.
I hope I have made it clear that we are making effective, targeted investments that continue to unleash their full potential and, in turn, Canada's full potential.
We will continue to build on our success in budget 2017.
Mr. Speaker, I will be sharing my time with the fine member of Parliament for , who, I am told, will be far more eloquent and on point.
I am pleased to rise today to speak on the motion presented by the hon. member for regarding taxation. I will be voting to oppose this motion. I will say that I would have preferred to support it and vote for it, as many of the principles it speaks to I support. I must also point out that the Conservative Party of Canada believes strongly in keeping taxes low, much as it also believes in ensuring that all corporations and Canadians need to pay their fair share of tax.
While this motion rightly seeks to reduce offshore tax evasion, it avoids one of the root causes of the problem, and that is too many taxes. We know that high taxes drive businesses out of the country and dampen Canada's entrepreneurial spirit. We know that high taxes hurt job creation by making it more difficult to start and run a business. We know that high taxes hurt Canadian families that are trying to build a brighter future for their children.
If we want to stop driving families and businesses out of this great country, we need to start by lowering taxes to make Canada more welcoming to them, yet it would seem that the government is doing precisely the opposite. Instead of looking at ways to foster entrepreneurship and business growth, the government is desperately looking for new ways to bring in more money to pay for its reckless and irresponsible spending. We have seen a report from Bloomberg pointing out that business investment in this country has fallen to the lowest level since 1981, and, depending on the statistics, we have seen low grades of investment since World War II. Therefore, this is an issue.
The government has failed to follow through on its promise to cut taxes for small businesses. Next it rolled back important tax cuts for Canadians, including the popular fitness and children's arts tax credits. Recently it started looking at whether to tax health and dental benefits. It is clear that the government just does not get it. It plans to make life more expensive for Canadians.
The Conservative Party will fight to make life more affordable, not less. When the Conservative government was in power, it was Prime Minister Stephen Harper who fought to do exactly that. Conservatives understood the value of low taxes and the importance of fighting tax evasion. A pragmatic and balanced policy would achieve both goals. For example, in economic action plan 2013, the Conservative government introduced a number of measures designed to deal with tax evasion, including requiring financial intermediaries, including banks, to report international electronic fund transfers of $10,000 or more to the CRA; extending the normal reassessment period by three years for taxpayers who have failed to report income from a specified foreign property on their annual income tax returns and have failed to properly file the foreign income verification statement; revising form T1135 reporting to provide more detailed information, including the names of specific foreign institutions and countries where offshore assets are located and the foreign income earned on those assets; and streamlining the process for the Canada Revenue Agency to obtain information concerning unnamed persons from third parties, such as banks.
Conservatives also launched the international tax evasion program aimed at reducing international tax evasion and avoidance. Under this program, the CRA would pay rewards to individuals with knowledge of major international tax non-compliance when they provided information to the CRA that led to the collection of outstanding taxes due. This program helped target high-income taxpayers attempting to evade or avoid tax using complex international arrangements.
Economic action plan 2015 built on these measures and announced an additional $25.3 million over five years to expand its activities to combat international tax evasion, and $58.2 million over five years to specifically deal with large and complex business entities that were undertaking tax evasion. I would note that the has mentioned some of the investments the government makes, which shows that there are progressive efforts to curb tax evasion in this country.
These measures help make sure that every Canadian pays their fair share. In fact, between 2006 and 2015, the Conservative government aggressively moved to close more than 85 tax loopholes. Closing these loopholes amounted to billions of dollars saved annually. That meant lower taxes for all Canadians, not just a select few.
It is not just us who believe that these measures have helped. In the fall of 2013, when the Auditor General conducted a review of offshore banking, it was concluded that CRA was diligent and that the new measures were helping. Our plan worked on this very issue and is continuing to help CRA crack down on tax evaders. We will continue to advocate that the Liberal government consistently review how it can best address the problem.
Beyond taking direct action to combat international tax evasion, the Conservative Party also took steps to encourage new investment to come to Canada by building a tax-friendly environment for businesses. Conservatives understand that we need to be tough on tax cheaters while also making sure that our tax system is not driving people away. That is why we introduced a number of measures that reduced the overall tax burden in Canada to its lowest level in 50 years. In fact, the Conservative government cut taxes more than 180 times. That is because we do not simply say we will do something; we follow through with those commitments we make to Canadians.
Our record on taxes is clear. We lowered the federal corporate income tax rate to 15% to help create jobs and economic growth for Canadian communities. We lowered the small business tax rate. We introduced a small business job credit, which lowered payroll taxes by 15% for small businesses. We also cut the red tape burden for businesses, which eliminated more than 800,000 payroll deduction remittances to CRA made every year by over 50,000 small businesses.
All these measures and more led Bloomberg to rank Canada the second most attractive country in the world in which to start and grow a business. In fact, across the G7, Canada had the lowest overall tax rate on new business investment. By cracking down on tax evaders and lowering taxes and tax burdens for businesses, the Conservative Party introduced the kind of balanced approach needed to foster a fair and friendly system.
It is important to note that the NDP voted against every single small business tax cut we introduced between 2006 and 2015. I ask my hon. colleague why he does not put forward a motion that both targets tax evasion and lowers the tax burden for Canadian businesses. That is the sort of policy I want to see from the government: a pragmatic, balanced approach that will lower taxes rather than raise them and that will continue to build on the strong work done by the previous government to crack down on tax evasion.
It is critically important that we target Canadian tax evaders, absolutely. Certainly, I believe that all members in this place would agree on the importance of cracking down on international tax evasion. However, we must also fight to lower taxes to help spur job creation and economic growth and to keep Canada competitive with other jurisdictions. By doing this, we will save money for the Canadian taxpayer and work to make Canada the best place in the world to start and grow a business.
There are so many things we can do to make us more competitive so that business investment comes into this great country, such as interprovincial trade and lowering our regulatory burden, things that down south, the new administration is currently looking to do.
While I appreciate where the NDP members are coming from on this, I am sure that they would understand where I am coming from. Again, this is a fine country. I welcome debate on any topic a member of Parliament believes needs to be heard. We need to do more in the area of lowering taxes, coupled with the efforts we continue on tax evasion, so that overall, we can bring more prosperity to this country and curb illegal activities.
Mr. Speaker, no one stands more firmly against tax evasion than the Conservative Party of Canada. We believe all taxpayers should pay what they owe in taxes, and there should be no special treatment.
The Conservative Party believes in keeping taxes low for all Canadians, but we also believe in ensuring that all corporations and individuals pay their fair share of tax. We are committed to lower taxes for all Canadians, not just a select few.
The previous Conservative government had a strong record of standing up to international tax avoidance. To enhance the integrity of the tax system, the Conservatives created the stop international tax evasion program, aimed at reducing international tax evasion and avoidance. We remain committed to addressing the issue of international tax evasion and avoidance and will continue to advocate for Canadian taxpayers.
Under the leadership of Prime Minister Harper, the government moved aggressively to close more than 85 tax loopholes, which saved the government and the taxpayers of Canada billions of dollars annually. However, I do have some concerns about the motion, which does not seem to take into account the structure of our tax system.
I think that it is offensive to Canadian taxpayers to suggest that those who take advantage of legitimate deductions and exemptions should be lumped in with those who are evading taxes by hiding money offshore. Certainly, those people who are able to claim, for example, the children's fitness tax credit or the arts tax credit, which were cancelled by the current government, were only trying to do what was best for their families. They used the deductions allowed them by law. I can only conclude that the hon. member who sponsored this motion does not understand that tax deductions are available to all Canadians. They are part of making the taxation system fair for all. They are not something offered to benefit the ultra wealthy.
No one disputes that tax evasion is a problem, whether it is $7 billion annually or $70 billion, but the hon. member cannot say for certain, as the number is only an educated guess. However, it is important to remember that we in the House are responsible for the laws and regulations of the taxation system. If there are loopholes, deductions, and exemptions, we have only ourselves to blame. It is not fair to blame the taxpayer for taking advantage of what they are legally entitled to, and I stress the word “legally” in this matter.
By all means, we should prosecute those who are breaking the law by avoiding paying taxes. However, given the spending habits of the current government, I applaud those who use legal means to keep money in their own pockets rather than hand it over to a pack of fiscally irresponsible spendthrifts who do not seem to understand that tax money is not theirs but given to them by Canadians in trust. Taxpayers expect and deserve wise stewardship from politicians, not $800,000 office renovations. No wonder people resent having to pay taxes when they see things like that happening.
The motion calls on the government to address tax measures that primarily benefit the wealthy, which seems reasonable enough. After all, we all know who the wealthy are. They are anyone who has more money than I do. That they may have earned their money through hard work and innovation would seem to be irrelevant. It is assumed by some that those they consider wealthy should be paying more, even though we talk about treating all taxpayers fairly and equally.
Perhaps a case can be made that those who have more should pay more, but I do not see the case being made in this motion. Indeed, we already have different tax brackets in Canada. The wealthy are already paying more. Therefore, exactly what measures does the motion address? We are left to speculate.
The government is also told that it should take aggressive action to tackle tax havens. The how and why is left to the imagination. I believe that if we have a fair taxation system, there will not be the same incentive there is now for those who know how to shelter their money offshore. When people do not believe the taxation system is fair, when people do not believe the government spends tax revenue wisely, it is very tempting to look for ways to keep their money out of the hands of the taxman. What we need is a government that understands that budgets do not balance themselves, a government that does not pile things like a carbon tax on hard-working Canadians.
The motion calls on the government to tighten rules for shell companies. Once again, there is no definition to be found here. It is assumed we are in agreement that shell companies need additional rules and regulations, but there is no rationale set forth in the motion. We have to take the hon. member's word that this is a problem. I do not see any suggestion of illegality here, just a call for something to be done.
The government is also told to renegotiate tax treaties that let companies repatriate profits from tax havens to Canada tax-free.
I do not think I was in the House when those treaties were approved by Parliament, but I cannot say for certain as the motion does not say which treaties should be renegotiated. I can only assume the government is supposed to know these things, perhaps through mind reading. Nor do I know why the treaties were negotiated to allow tax-free profit taking. There was probably a good reason at that time. The House can of course change its mind if it feels a mistake was made in the past.
What I do know is that renegotiating treaties carries certain risks. There has been a lot of publicity recently about politicians who want to renegotiate certain treaties. The implication is that there are winners in such negotiations and there are losers. There is not always equal treatment. If we ask to reopen a treaty, while Canada may have a certain goal in mind, that goal may not be shared by the other country or countries. We might find, after renegotiation, that there is less benefit to Canada than there is now. However, I am only speculating as there are no details here. We are just supposed to know what the bad deals are.
I understand why people are in favour of dropping the penalty-free amnesty deals for people suspected of tax evasion. Canadians are naturally upset when they hear someone has managed to avoid being penalized for tax evasion. It does not seem fair somehow. I suspect the hon. member who brought this motion forward had a particular highly-publicized case in mind.
The Canada Revenue Agency operates independently, free of political interference. This sounds to me like we politicians are trying to tell it how to do its job, when we may not know the details of what and why it does something.
As I understand it, the lack of prosecution in recently publicized cases was not a matter of special treatment, but standard procedure when people come forward and voluntarily disclose that they may owe money that was previously undeclared. To encourage such disclosure, the CRA waives penalties. That was not the case with CRA auditors finding wrongdoing. The money might never have been collected if the individuals had not come forward. The CRA might never have realized what it was owed. Therefore, while the idea of amnesty is offensive to hard-working Canadians who pay their taxes in full and on time, there are those who can make a credible case to defend the process. Removing voluntary disclosure, which seems to me to be what is being asked here, could conceivably lead to less tax being collected, not more.
It would be far better to call on the government to bring in a fair and reasonable tax system, but that is as likely as the bringing in a balanced budget.
Mr. Speaker, I will be sharing my speaking time with the member for .
I am very proud to rise in the house today to speak in favour of the motion moved by my colleague from . The purpose of the motion is to fight tax evasion and tax benefits that help only the wealthiest Canadians, banks, and multinational corporations, and do nothing whatsoever to help the vulnerable and the working people who dutifully file their taxes every year, as they will have done in about a month.
If we want to provide quality services to everyone in this country without discriminating on the basis of income or class, we have to tackle tax evasion, which is costing us billions of dollars every year.
They say that the Canadian democracy we are here to defend was designed to ensure equal treatment for all citizens, but I am sorry to say that our tax system does not reflect those values of equity and equality in the least. On the contrary, inequality between the rich and the poor is growing steadily. In fact, it is growing faster here than in the United States.
Unfortunately, loopholes and tax exemptions still exist today. In fact, there have never been so many. Most working men and women cannot rely on these loopholes, tax deductions, tax exemptions or tax credits. It is very difficult for Canadians to accept that the government is not doing its part to ensure that fraudsters are prosecuted and pay their fair share of taxes like anyone else.
For example, the highest-paid CEOs in Canada earn the annual salary of an average worker in half a day. Other statistics show that Canada's highest-paid CEOs earn 193 times the average Canadian salary. It is truly insulting that nothing is being done to ensure that people pay their fair share of taxes, to redistribute the money and to realize our vision of society, which involves access for every citizen to, for instance, quality education and a quality health care system that is not two-tiered.
Canadian seniors have worked hard throughout their lives, and they must be given a decent retirement, which they don't all have. In the riding of Salaberry—Suroît, as in all other ridings, some people cannot eat fruits and vegetables every day, which is not right in a country as wealthy as Canada.
The wealthiest Canadians do not need tax exemptions to live. Unfortunately, the Liberals are maintaining tax loopholes that benefit the wealthiest, while most Canadians are left out. Alain Deneault calls it fiscal haemorrhage. He raises the fact that the corporate tax rate has gone from 38% in 1981 to 15% today. I would like to point out that citizens pay between 15% and 33% in federal tax. Many of them pay more taxes than multinationals and large companies. Mr. Deneault also criticized the fact that companies contribute very little to the financing of public services, whereas they benefit, for example, from high-performance infrastructures and a highly skilled workforce.
The privileged are benefiting from not just one advantageous tax measure. In fact, there are 64, of which five are considered progressive and 59 are considered regressive. By “regressive measures” we mean measures that benefit the wealthiest half of the country instead of the least fortunate half of the country. There are 59 tax measures benefiting the wealthiest half of Canadians. That defies reason; these measures cannot be described as fair or socially just.
In 2011, Canada's lost tax revenues were greater than $100 billion, or roughly 40% of the total federal budget.
Instead of benefiting Canadians who have a hard time making ends meet, that money is staying toasty warm in paradise in places like the Virgin Islands, the Bahamas, and several other countries that have already been mentioned. A little later I will explain the purpose of these countries, these tax loopholes, or tax havens as they are called.
The government should not gear its policy to the wealthiest 1% of society, but to all Canadians. The priority should be affordable housing, public services, and education, as I have said and as many of my colleagues have said many times in their speeches.
During the 2011 and 2015 election campaigns, the Liberals were committed to closing tax loopholes involving stock options. The CEOs of the 60 largest publicly-traded companies in Canada receive roughly 25% of their pay in stock options. Stock options are widely used because they are taxed at half the rate of regular income. As such, a 50% reduction is given to those who can afford stock options, so the CEOs, who are already the wealthiest. Initially, they were meant to benefit small and medium-sized start-up businesses, but it quickly became apparent that they were only benefitting the wealthiest.
The Liberals have clearly failed to take action on this issue. They led Canadians to believe that they would bring real change, but instead they maintained the Conservative policy, which they had previously criticized. We know that Bay Street CEOs led a campaign appealing to the current government to preserve their tax benefits. The Liberals are not doing anything to combat poverty, and instead, are working hard to protect the fortunes of the wealthy. This flip-flop is unacceptable for the workers who cannot afford to pay their taxes. Our motion calls on the government to keep its election promises and close the stock option loophole.
In addition to the tax benefits they enjoy in Canada, some wealthy people engage in tax evasion, which is illegal. The Quebec government alone estimates that tax evasion accounts for $3.9 billion in lost revenue. For 2016, the Conference Board estimates that Canada lost $47 billion in tax revenues.
To avoid paying their fair share of taxes, businesses and wealthy individuals can hide their money in tax havens, which are countries that have a low- or even no-tax policy for corporations. Canadian firms sheltered $160 billion in 2011 alone in the Cayman Islands, Barbados, and other such countries.
That has been made possible by bilateral tax agreements between Canada and 92 countries. Among these 92 countries, some, such as Barbados, have a tax rate between 0.25% and 2%, whereas in Canada companies are supposed to be taxed at 15%. These companies, which conduct absolutely no economic activities in Barbados, the Cayman Islands, or elsewhere, use these countries in order to not pay too much tax and then send their money to Canada.
We have repeatedly asked successive governments, and now the Liberal government, to take action and to review this type of bilateral agreement with countries where there are abuses and where there may be fraud and tax avoidance.
This phenomenon is becoming more prevalent. According to a study by the Institut de recherche en économie contemporaine, the amount of financial assets transferred from Canada to the seven top tax havens in the world was 37 times greater in 2014 than in 1987. The use of foreign tax havens is at an all-time high.
Canada is less engaged than the other G7 countries in the fight against tax havens. The Conservatives cut 3,000 Canada Revenue Agency employees responsible for uncovering tax evasion, and the Liberals have not replaced them. These were highly qualified auditors and managers. It has been shown that, for every dollar invested in tackling tax evasion, taxpayers get $10 in return. It is well worth our while to address this problem.
The Liberals keep saying that they have invested $444 million in the Canada Revenue Agency, but we have not seen any results. There have not been any criminal investigations. Absolutely nothing has changed. I will continue by taking questions.
Mr. Speaker, I am pleased to rise in this House to support the motion tabled by my colleague, the member for . The motion calls on the government to close the loopholes on tax havens and to crack down on tax evasions.
Why is this motion so important? Decade after decade vital public services are left underfunded, ignored, or even cancelled. Far too often, the justification for the inaction or cuts in programming is that we cannot afford it. Oddly enough, the affordability question is only asked when we are talking about investments in support of social programs. It never seems to get asked when it comes to providing lucrative tax credits for the wealthy or the continual slashing of corporate taxes or maintaining costly and inefficient tax expenditures that only apply to the highest earners in the country.
Successive governments, Liberals and Conservatives alternating, have chosen to allow these oh so splendid tax loopholes that benefit Canada's wealthiest to continue. For the Liberals and Conservatives, these tax giveaways for the elite are never questioned. For them it is a standard practice. Why? It is in their DNA. Election cycle after election cycle, it is the same old story. Even when they pretend that it is an issue they are concerned about and they campaign on clamping down on these ludicrous tax loopholes, for example, as even written in the Liberals' platform, after the election, boom, it is as though someone waved a magic wand and that promise disappeared. It is gone.
In the most recent election, the Liberals thought that the employee stock option deduction was disproportionately benefiting the very wealthiest Canadians at the expense of everyone else, and of course they were right about that. The Liberals specifically noted in both their 2011 and 2015 election platforms that 8,000 Canadians with very high incomes were deducting an average of $400,000 from their taxable income through these stock options. This represents 75% of the fiscal impact of this deduction, which in total cost $750 million in 2014. The Liberals proposed changes to this tax loophole to raise an additional $560 million for the government's coffers that could have been put into use for public services. Then, in March 2016, just months after the election, when the Liberal government was asked what it was going to do and whether it would follow through on the promised changes to crack down on this lavish tax loophole for the ultra-wealthy, the stated, “It's not in our plans.”
What happened, we might ask. Documents obtained under access to information show a direct correspondence between CEOs and the pressuring him in advance of the 2016 budget to backtrack on that promise, and guess what. The corporate elites got exactly what they wanted, a $560-million gift courtesy of the Liberal government.
According to a CCPA report, roughly 99% of this money is given to the highest 10% of income earners in Canada. In fact, the study found, “In essence, there is no benefit from this tax expenditure to anyone making less than $215,000 a year.” While this loophole might have originally been designed to help raise money for start-ups and expansions, it is now primarily used by Canada's ultra-rich to avoid paying their fair share of taxes. In case members are wondering, Canada's top CEOs now make 193 times the average Canadian's salary. In fact, Canada's richest CEOs made the average Canadian's annual salary before lunchtime on the first day of work this year.
The heads of Canada's five big banks own $6 million in stock options. Is there a real reason for these individuals to need preferential tax treatment? Are Canada's big banks at risk of being unable to start up or expand if these loopholes are closed? Are they not making record profits already?
To be sure, these are the corporate elites, and in the end, no matter what the Liberals say, they always have the interests of these elites at heart. Canadians get conned every time. They want to believe in the Liberals and what they campaigned on, but in the end, frankly, the campaigning Liberals are not the same as the governing Liberals. What they say is not what they do. They just cannot resist the pressure being put on them by the most powerful in this country to leave in place a system which benefits them at the expense of everyone else.
If people think these tax giveaways stop with stock option loopholes, they should think again. Over the years, between the Conservatives and the Liberals, Canada's corporate income tax rate has dropped dramatically, from 37% to 15%. Members heard me correctly. That is a 22-point drop. The office of the parliamentary budget officer found that the former Conservative government's corporate tax giveaways cost taxpayers an additional $12 billion every year. That is $12 billion, not $12, not $1,200, but $12 billion.
If that is not enough already, recent international headlines, such as the Panama papers and the Canadian-born KPMG tax haven scandal, among others, showed the wealthiest and corporations are increasingly turning to aggressive tax avoidance measures through the use of shell corporations and offshore accounts in tax havens to avoid paying their fair share of taxes. It is estimated that in 2015, Canadian corporations alone stashed almost $40 billion in the top 10 tax haven destinations.
From 1988 to 2001, Canadian direct investments in Barbados, a top tax haven destination, increased from $628 million to $23.3 billion, a 3,600% increase. The increased use of these tax havens means Canadian taxpayers are losing $7 billion in taxes each year. That is $7 billion that Canadians will never see invested in much-needed infrastructure programs for hard-working Canadians.
It does not stop there. Another big tax giveaway is the dividend gross-up and tax credit. This measure cost taxpayers $4.1 billion per year. By the way, 91% of this money goes to the top 10% of income earners and roughly 50% of that actually goes to the top 1%. Do not forget that the foreign tax credit comes with a price tag of $740 million per year. According to the CCPA's recent study, if we add up all the measures that benefit mostly the wealthy, in 2011 alone, there was more than $100 billon in forgone revenue. That is money that could be invested in critical programs for Canadians.
What are some of those critical programs? How about restoring the national affordable housing program that the Liberals axed in 1993? Homelessness exists because we allow it to exist. A 2014 study found that putting Canada on a path to ending homelessness would cost roughly $3.7 billion per year.
There was a gathering of concerned citizens bound by one common thread, the desire to end homelessness, on February 25, the third annual Coldest Night of the Year walk for the homeless. In Vancouver, close to 200 people came out to walk on that cold winter night in my riding. Together we raised $50,000 in support of those who are homeless, hungry, and hurting. United across the country, some 118 communities also joined in this annual walk. This event was a clear statement that many Canadians want to see an end to homelessness. Ending homelessness is entirely possible. It is not rocket science. All we need is to close these tax loopholes.
What about big corporations? If we closed the tax loopholes for big corporations, we could invest in a much-needed pharmacare program. I have met seniors who are cutting their pills in half so they can stretch out their medications. I have met seniors who are eating pet food to survive each day. We are providing these huge tax giveaways. Why? The government says we cannot afford these other programs. I say yes we can. We should close the loopholes, tax corporations, reinvest the money into communities for the people, so all Canadians can have the benefit of succeeding in our country.
Madam Speaker, I am pleased to speak to the important issue of tax evasion and aggressive tax avoidance brought forward by my colleague the member for . I will be splitting my time this morning with my friend and colleague the member for .
First, let me state unequivocally that the Government of Canada is committed to combatting international tax evasion and aggressive tax avoidance. We believe every Canadian must pay his or her fair share of taxes, period.
Last year's budget introduced a number of measures to combat tax evasion and avoidance and to improve compliance, actions that will help ensure that everyone does their share and pays their fair share.
Furthermore, they support the objective of an economy that works for the middle class and not those who seek to skirt our tax laws or otherwise gain an unfair advantage. Tax evasion and aggressive tax avoidance by individuals and businesses have a fiscal cost to governments and to taxpayers. They reduce the fairness and integrity of the tax system. They shift the financial burden onto Canada's middle class, while often benefiting those who may be more than capable of paying their own fair share.
This is why our government took decisive action through budget 2016 to crack down on tax evasion and to combat tax avoidance. Budget 2016 invested $444.4 million over five years to enhance the Canada Revenue Agency's assessment capabilities through the hiring of more auditors and specialists who will have the resources needed to undertake more expansive and comprehensive investigative work.
These investments to support CRA's efforts to crack down on tax evasion and combat tax avoidance are expected to generate approximately $2.6 billion in additional taxes over five years.
With the benefit of these new resources in the last year, CRA has begun reviewing all taxpayers and certain segments of the population identified as high risk. The agency is using external data and publicly available information to maximize its effort to identify non-compliance.
The CRA has also toughened its response to leaked lists of taxpayers with offshore holdings. For example, with the Panama papers, the CRA has more than 76 taxpayer audits under way, and extensive data is currently being reviewed. The CRA has also executed search warrants, and several criminal investigations involving both participants and facilitators are ongoing.
However, we also recognize that assessing tax revenues alone is not enough. Once we do an assessment we need to be able to collect the unpaid amounts and that is why budget 2016 invested an additional $351.6 million over five years to improve CRA's ability to collect these outstanding tax debts. This is revenue we will be investing to help strengthen and grow our middle class.
Indeed, creating an economy that works for the middle class and those working hard to join it is what guided our actions right from the start of our mandate. As one of our first actions in December 2016, we introduced the middle-class tax cut. Nearly nine million Canadians are now benefiting from this measure. Single individuals who benefit are seeing an average tax reduction of $330 every year, and couples who benefit are seeing an average tax reduction of $540 every year.
Also with budget 2016, we put more money directly into the pockets of low- and middle-income families through the Canada child benefit, a more generous, tax-free, and better targeted benefit that is lifting hundreds of thousands of children out of poverty. The CCB is giving nine out of 10 families with children more money every month to spend on everything from school supplies, to school clothes, to sports equipment. Families benefiting have seen an average increase in child benefits of almost $2,300 during the 2016-17 benefit year.
These actions and others are helping to strengthen and grow the middle class and our economy. However, we also know that more needs to be done. We need to make sure that our tax system functions as intended and that it is fair, effective, and equitable.
We will continue to take legislative and other actions on both the international and domestic fronts to ensure that Canada's tax system is fair and works for the middle class.
Globally, Canada has been a very active participant in efforts to address international tax evasion and avoidance. Canada is an active member of the Global Forum on Transparency and Exchange of Information for Tax Purposes, which was established to ensure that high standards of transparency and exchange of information between jurisdictions for tax purposes are in place around the world.
Canada has also developed an extensive network of bilateral tax treaties and tax information exchange agreements, and it is party to the multilateral Convention on Mutual Administrative Assistance in Tax Matters, which provides for exchange of tax information. This allows the CRA to obtain information from foreign tax authorities on Canadian taxpayers' investments and activities in foreign countries that is relevant for Canadian tax purposes.
To build on this information sharing, Canada recently adopted legislation to implement the common reporting standard developed by the OECD and endorsed by G20 leaders. Canada is one of more than 100 jurisdictions worldwide that have similarly committed to implement this reporting standard, which provides a framework under which the tax authority in a country will share information, securely and automatically, on the financial accounts held by non-residents in that country with the tax authority of the country in which the account holder is resident. This House has recently passed legislation to implement this standard, starting on July 1 of this taxation year.
Canada has also been actively engaged in a second multilateral initiative aimed at addressing base erosion and profit shifting, commonly known as BEPS. This refers to certain tax planning arrangements undertaken by multinationals, which often through legal means exploit the interaction between the tax rules of different countries in order to minimize taxes. Canada has already implemented a number of the BEPS project recommendations, and going forward, the government will continue to work with the international community to ensure a coherent and consistent response to BEPS filing going forward.
Canada supports the important goal of improving corporate transparency worldwide. The Government of Canada has agreed to international standards developed by the Financial Action Task Force and the Global Forum on Transparency and Exchange of Information for Tax Purposes in support of corporate transparency. The proceeds of crime, money laundering, and terrorist financing regulations include requirements for financial institutions regarding the collection of information on beneficial owners of corporations.
Taken together, all of these actions are consistent with the basic principles of fairness that define us as a nation. Canadians should have confidence that their tax system has integrity. This is what tax fairness is all about. By taking action to prevent tax evasion and close tax loopholes, we will improve the fairness and integrity of the tax system, and contribute to fiscal sustainability both at home and abroad. We believe that our plan is the right one to improve the integrity of Canada's tax system.
Madam Speaker, it is always a privilege to rise in this House.
In an uncertain future, our government is working hard to ensure that Canada's economy works for the middle class. We believe that when we have an economy that works for the middle class, we have a country that works for everyone, and that means ensuring everyone pays their fair share of taxes.
Over the last year, our government has done some big things. We were elected on the platform of growing the middle class, and that is exactly what we have been doing.
We started by raising taxes on the wealthiest 1% of Canadians so we could cut taxes for the middle class. Specifically, we reduced the 22% federal income tax rate to 20.5% for 2016 and all subsequent tax years, and we raised the taxes on the wealthiest Canadians by introducing a new top income tax rate of 33% for individuals with a taxable income of over $200,000. As a result, nearly nine million Canadians pay fewer taxes today.
In today's economy, Canadian families need all the help they can get. This is why we introduced the Canada child benefit, which is a real game changer. The Canada child benefit is making a real difference in the lives of Canadians and their families' budgets. Compared with the old system under the previous government, the Canada child benefit is simpler, fully tax-free, more generous, and better targeted to those who need it most. Because the government is no longer sending cheques to millionaires, nine out of 10 Canadian families are receiving more child benefits than they did under the previous government. Families benefiting saw an average increase of almost $2,300 per year. On a monthly basis, that is almost $190, on average, that families receive directly into their pockets. That is extra money to help Canadian families pay for school supplies, their children's education, and child care expenses.
Furthermore, on March 2, the final step to strengthening the Canadian pension plan was put into force. This means that strengthening the CPP is no longer an idea, but a reality. This historic agreement between Canada's federal, provincial, and territorial governments will ensure that today's young Canadians will be able to count on a strong public pension plan when they retire in the future. At maturity, the CPP enhancement will increase the maximum CPP retirement benefit by about 50% which, in today's dollars, represents an increase of nearly $7,000 to a maximum benefit of $20,000.
It is evident that we are working hard to deliver real change for Canadians. In that time, significant early progress has been made. However, more hard work lies ahead.
Paying our fair share of taxes is essential to financing the measures that enhance the lives of all Canadians. When certain individuals or corporations find ways to skirt the system, it is the middle class that usually picks up the tab. That is totally unacceptable and counterproductive to our country's goals. That is why making the tax system more fair is an ongoing priority of this government.
As announced in budget 2016, the Government of Canada is conducting a comprehensive review of federal tax expenditures. It is doing so in recognition of concerns that have been expressed regarding efficiency, fairness, and the complexity of the tax system. The objective of the review is to ensure that federal tax expenditures are fair for Canadians, are efficient, and are fiscally responsible.
External experts have been engaged to provide evidence and advice to the government. This approach ensures that the review is informed by a range of perspectives, both inside and outside government.
In addition, the government is committed to strengthening the efforts to combat international tax evasion and avoidance. We have taken, and we will continue to take, measures to do this. These efforts help protect the revenue base and give Canadians greater confidence that the system is fair to everyone.
Budget 2016 invested $444 million over five years directly into the Canada Revenue Agency to crack down on international tax evasion and combat tax avoidance. This investment is enabling the CRA to hire additional auditors, develop robust business intelligence infrastructure, increase verification activities, and improve the quality of its investigative work. These new investments to support the CRA's efforts to crack down on tax evasion and combat tax avoidance are expected to generate around $2.6 billion in taxes over five years.
With the benefit of these new resources, the CRA has set up teams to focus exclusively on promoters of offensive tax schemes. As a result of these new reporting requirements, the CRA has been tracking information on electronic fund transfers over $10,000. Based on the information collected, audits of the highest risk taxpayers moving money between Canada and offshore jurisdictions are under way.
So far, a total of 41,000 transactions have been analyzed, totalling over $12 billion. Overall, the CRA is currently conducting audits of over 820 taxpayers and criminally investigating 20 cases of tax evasion related to offshore accounts.
That said, we also recognize that assessing tax revenues alone is not enough. Once we do an assessment, we need to be able to collect the unpaid amounts. That is why budget 2016 invests an additional $351 million over five years to improve the CRA's ability to collect these outstanding tax debts.
The Standing Committee on Finance, of which I am a member, tabled a report just last October on the study of tax avoidance and evasion. The report concluded with 14 recommendations to the government, including, but not limited to, the following: conducting a review of the voluntary disclosures program; requiring all tax advisers to register their tax products with the CRA; improve relationships between the CRA and the Department of Justice, which prosecutes these cases of tax evasion; improve statistical reporting requirements at the CRA on their efforts on tax evasion and avoidance, for transparency; and taking a lead in ensuring global implementation of the OECD and Group of 20's recommendations on the issue.
Just two weeks ago, the government provided its official response to the report. I am proud to share that in the response, the government affirms its support of all 14 recommendations. Additionally, the government shared the work that has already been done or is currently being undertaken to ensure all Canadians pay their fair share of taxes in our great nation.
Before I conclude, let me emphasize that our government is focused squarely on Canadians and the things that matter most to them. Things like growing the economy, creating jobs, strengthening the middle class, and helping those working hard to join it. Part of this responsibility includes making sure Canada's tax system works for everyone and that we all pay our fair share.
Going forward, we will continue to monitor and strengthen the tax system, so that we can continue to bring real change to the middle class and to all Canadians.
Madam Speaker, I will be splitting my time with the member for .
I am pleased to speak in support of today's opposition day motion, brought forward by my colleague, the hon. member for . He is also the New Democrats' newly minted finance critic, and I congratulate him on the appointment. Based on the debate he has brought forward today, I know he will do a terrific job as our finance critic.
The motion we are debating today is very straightforward, and I would hope that the Liberal government would support it. It is a two-part motion. It calls on the government to address tax loopholes and to crack down on the use of tax havens. It is about enforcing the basic principle that every Canadian should pay his or her fair share of taxes. It is about tax fairness.
I am not suggesting that the current tax system is the model of fairness, but we know that far too many of the wealthiest Canadians are shirking their responsibility to pay their taxes, and in some cases, are going to extraordinary and even criminal lengths to avoid paying them at all.
A few years ago, Warren Buffett famously claimed that he was paying a lower tax rate in the U.S. than his secretary. It goes to show how many loopholes exist for the wealthiest in society. In Canada, the stats are staggering. Canada's top CEOs earn 193 times the average person's salary. Two Canadian billionaires possess the same amount of wealth as nearly a third of Canadians, $33.1 billion U.S. Canada's richest CEOs earn the same in half a day as the average Canadian worker earns in a year.
What New Democrats are suggesting here today is not radical. All we are saying is that the government needs to tighten up the rules and crack down on these tax loopholes and tax havens that are allowing the super-rich to avoid paying their fair share.
According to the Canadian Centre for Policy Alternatives, there are about 59 tax measures that mostly benefit people above the average income level, which costs the government more than $100 billion in foregone tax revenues. These loopholes significantly undermine the government's ability to provide funding for key priorities, such as improving health care and seniors care, investing in affordable housing and public transit, and even launching an affordable child care system and national pharmacare plan, two ideas that would go far in building a stronger, healthier Canada. I think about what these programs would mean in my riding of . They would improve the quality of life and the affordability of life for so many families and individuals.
In the last election we talked a lot about the stock option deduction loophole. In most of Canada, profit from stock options is considered to be a capital gain and therefore is taxed at half the rate for regular income. Many companies offer stock options to their employees as an incentive in their compensation packages. This tool was initially designed to help raise money for start-ups and expansion, but now it is being primarily used by Canada's wealthiest.
Stock options now make up about 25% of CEO compensation at Canada's top 60 publicly traded companies. This costs federal and provincial governments close to $1 billion every year in foregone revenue. The Liberals know this to be true. In 2011 and in 2015, their platforms acknowledged these very facts. Both the New Democrats and the Liberals campaigned on closing the stock option deduction loophole, but here we go again, another promise made by the Liberals that apparently they never meant to keep.
The other week, at the international trade committee, we had the pleasure of hearing from the , who discussed what her government is doing to support more small businesses in accessing international markets. I asked her about the Liberals' campaign promise to reduce the small business tax. She referred to it as a great sound bite but said that it was not a good idea anymore. Her comments struck me as very cynical and certainly is not what I am hearing from those in my riding of .
When parties make election promises, such as reforming the electoral system, lowering the small business tax rate, or closing the stock option deduction loophole, Canadians expect the government to deliver, not to turn its back and later scoff at the very premise of these commitments. The Liberals are breaking campaign promises left and right. It is shameful. I am worried that after four years of the Liberal government, Canadians will be even more cynical about politics than they were after 10 years of the Conservative government.
After promising to fully tax individual stock options exceeding $100,000 during the last election campaign, after forming government the Liberals announced that they will leave it untouched. We have now learned of intense lobbying by Bay Street CEOs, who benefit greatly from this measure, to keep this loophole open.
Both the Liberals and the Conservatives have now claimed that closing the stock option loophole would hurt small businesses and start-ups, arguing that they would not be able to give employees stock options as an incentive to help companies grow. However, closing the stock option loophole does not mean that companies would not grant stock options as compensation. Start-ups could still offer stock options to attract and retain employees. Those employees would just have to pay fair tax on the income, the same rate normal Canadians pay on their income, rather than receiving a 50% discount.
When we talk about loopholes and tax evasion, we are not talking about Canadians putting their money into RRSPs or TFSAs. We are talking about off-the-book illegal schemes, like the one cooked up by KPMG to hide Canadians' money in offshore accounts.
The second part of today's motion calls on the government to “take aggressive action to tackle tax havens”. The key word here is “aggressive”. It means “tightening rules for shell companies”. It means “renegotiating tax treaties that let companies repatriate profits from tax havens to Canada tax-free”, and it means “ending penalty-free amnesty deals for individuals suspected of tax evasion”.
This is not just a tax issue. It is about cracking down on white-collar criminals. The government members talk about the size of CRA's budget for going after tax evaders, but we still have not seen any criminal charges. It is clear that the government must do more to tackle tax cheats, who are robbing Canadians of billions of dollars of revenue that is sorely needed to improve our communities.
Canada is lagging behind other G7 countries in tackling tax havens. The previous Conservative government eliminated 3,000 jobs at CRA in the unit responsible for detecting tax evaders, including the jobs of hundreds of auditors and 50 highly trained managers. This is a perfect example of why ideologically driven budget cuts can be so shortsighted. The finance department's own numbers show a $10 return for every dollar invested in combatting international tax evasion and aggressive tax avoidance. The Liberal government has made new investments in CRA, which are welcome, but this is not a silver-bullet solution. Instead, it is a starting point in a larger conversation about how we tackle this complex problem.
I have already talked about many elements of an aggressive, effective strategy to combat tax loopholes and tax havens. Another policy I would like to draw my colleagues' attention to is the impact of drastic cuts to the corporate income tax. The Conservatives cut the rate by one-third, from 22% to 15%, over six years, and the Liberals have kept it at this very low level, which is even lower than the U.S. rate. The parliamentary budget officer has said that these corporate tax giveaways cost the government $12 billion annually. Evidence shows that the Conservatives' drastic cuts have not boosted investment or led to the promised job creation. Again, we have another ideologically driven decision that has not led to economic growth and job creation. It has just been a massive tax giveaway. Its only real impact has been to deplete the government of tax revenues that could be used to build better health care, community infrastructure, and other urgent priorities in Canada.
The Liberals promised change for everyday people. They promised policies that would build a fair economy that lifts everyone up, not just those at the top. Canadians are increasingly frustrated that the Liberals are failing to deliver. Instead, we are seeing business as usual. Instead of listening to the voices of everyday Canadians, the Liberals are listening to the loudest voices in the room, the ones of the lobbyists and well-connected insiders who look out for the interests of the wealthiest CEOs and corporations.
As a New Democrat and as the member of Parliament proudly representing Essex, I want to be a voice for the hard-working people who have been left behind by an economy that excludes too many. I want to fight for a Canada that works for everyone, not just the wealthy and the well-connected. Today, New Democrats are calling on the Liberal government to ensure that CEOs and big corporations pay their fair share. I hope all hon. colleagues will join me in voting yes to this motion.
Madam Speaker, I grew up in a simple home where hard work was just part of our life. My father worked in the forest industry, and my mother continues to be a psychiatric nurse. When the forest industry struggled, our family struggled but we always worked hard.
My family instilled in me a desire to ensure I always paid my fair share. My parents always told me, and I have always told my children this, not to complain about paying taxes, that this investment went into the important things like health care, highways, and helping those in need.
This is what we are here to talk about today, paying our fair share, ensuring all people in Canada are paying their part so we can build a strong country, invest in those things that build our social network, and keep the standard of living balanced in our country.
We are here today because everyday hard-working people are paying their fair share, even when it hurts. While these folks are doing their part, some with so much more are finding ways to not pay their part.
I would like to thank the NDP finance critic for bringing forward this motion, which is meant to address systemic inequalities in our fiscal system. Tax evasion, loopholes, shell companies, and tax havens are tools to avoid paying taxes. For weeks, KPMG has made headline after headline. Every couple of months we hear a similar story, creative money-peddling accountants finding a new way to cheat the system, and millionaires and billionaires finding ways to hide their money.
I want to be really clear. This money is made off the labour of someone. Their profit is at the expense of hard-working people across Canada. This is why ending tax loopholes is so important. We must look at this seriously because it is about the value of the working person. There are so many revelations that sometimes I have the urge to simply not read the articles. It is disheartening when so many people in my riding of North Island—Powell River are struggling hard every day. These stories pop up every couple of months, year after year, and we are still waiting for some real solutions.
We have all read at some point about creative money-peddling accountants finding new ways to cheat by whatever means and pushing countries in a race to the tax bottom, or pressuring the government not to take up the fight. Despite this, I still strongly think we cannot give in, that we can slowly and smartly take steps to dismantle these schemes and strengthen our Income Tax Act. This is so important. It is about the hard-working people in Canada who are paying more than their fair share, while rich people, millionaires and billionaires, are hiding their money.
I am so proud that today's motion offers some very specific examples of what Parliament should take very seriously moving forward. One example is the recent deal given to clients of KPMG, which facilitated their tax evasion, that freed them from any future civil or criminal prosecution, as well as any penalties or fines. In my riding, if people owe just a little, they are absolutely paying penalties and fines, even when it hurts them to do so.
The NDP is calling for a full investigation into the KPMG affair. Ending penalty-free amnesty deals for individuals suspected of tax evasion, a gift to wealthy tax evaders and aggressive tax avoiders, should seriously be considered. Enough is enough.
Another example is changing the corporate tax rules that allow for the use of shell companies, which serve no economic purpose other than to protect the wealth of the ultra rich. It plays an important role in large scale money laundering activities. At the heart of the Panama papers was the law firm Mossack Fonseca, which managed more than 300,000 companies over the years. This is unacceptable.
This debate is also a great stepping stone to this year's debate on the budget because of the opportunities and priorities of the budget and what they can do for all of us.
First, this is an opportunity for the , by addressing these special credits and loopholes that cost the government more than $100 billion in forgone revenue per year. If even a portion of this sum were recuperated, it could pay for a national pharmacare program, a national child care program, and upholding equal care for first nations children. We are still waiting for that amount of money to be provided for children who are suffering across our country.
Second, budgets are about priorities. In my riding of North Island—Powell River last week, I participated in the Coldest Night of the Year walk. I was tremendously pleased that so many from the community of Campbell River, across the riding, and other communities came and fundraised. They know the reality of people who do not have homes, or do not have appropriate food, or struggle every day just to survive.
It is so important to remember the people who pay their fair share and fight hard just to survive every day when we see what is happening with tax loopholes and tax evasion. I am very keen to take a close look at the proposed measures in due time to ensure fairness, including fiscal fairness, is finally taken seriously. Canadians deserve that.
The Liberals have not taken tax fairness very seriously in the past, and it is time to change that. If we take a step back for a moment, we see two parties in the House defending their sad record. They will share vast amounts of numbers, like the amount invested in the Canada Revenue Agency, recapturing funds, along with many fairytales, but Canadians are not fooled by these smokescreens. They know that lost revenue is due to misguided priorities and discarded promises.
One of the broken promises has to do with the stock option deduction. After promising during the last election campaign to fully tax individual stock option gains exceeding $100,000, the Liberals announced they would leave it untouched after they formed government. Again, hard-working Canadians are paying their fair share every day. It is only reasonable for us to hold to account those who are not paying their fair share.
We have now learned of intense lobbying by Bay Street CEOs, who benefit greatly from this measure, to keep the loophole open. At some point, we have to make the decision, and I hope the Liberal government will actually take steps toward ensuring that not only hard-working Canadians pay their fair share, but that the CEOs of companies pay their fair share as well. This loophole benefits the ultra rich, yet successive Liberal and Conservative governments have given up billions of dollars in tax revenue over the past three decades due to this loophole. The Liberals' flip-flop on the stock option loophole shows the influence that powerful insider lobbyists have on the government's policies.
The people who have influence on my priorities are the people who I serve in North Island—Powell River, people who work really hard every day, who have had to face the challenges of a changing economy, seeing a resource-based economy, watching as forest companies struggle, and watching as trees are shipped out of the riding. They want more of those good-paying jobs in their communities and they want to ensure they are not paying more than their fair share when other people are not paying what they should be.
The government's systemic acceptance of tax fraudsters and their entities is enabling them to cheat the system. Our system allows every citizen to contribute equitably to public services and social programs. If they do not, every Canadian is cheated.
In its 2016 annual report, Oxfam blamed tax havens on income inequality for much of the widening gap between the rich and the poor. Canadians want better health care, community infrastructure, good jobs, and for us to tackle climate change. Instead, the Liberals are maintaining tax loopholes that benefit Canada's wealthiest, while leaving most Canadians behind.
Seniors are making choices among heat, medication, and housing. Families cannot afford day care or even the toonie it takes to send their kids on school trips. It is time everyone pay their fair share and stop leaving the burden on the people who work the hardest and struggle the most.
Madam Speaker, before I begin, I wish to inform you that I will be splitting my time with the member for .
Let me begin by saying that when we have an economy that works for the middle class, we have a country that works for everyone. Since coming into office, our government has worked to bring confidence and optimism back to Canada's middle class and to help those working to join it. We remain committed to doing even more.
One of our government's first actions after coming into government was to raise taxes on the wealthiest 1%, so we could lower taxes on the middle class. We reduced the 22% federal income tax rate to 20.5% for 2016 and subsequent taxation years. This tax cut is already benefiting nearly nine million Canadians. Single individuals who benefit will see an average tax reduction of $330 every year and couples will benefit by seeing an average tax reduction of $540 every year. This means more money in the pockets of the middle class. To help pay for the middle-class tax cuts, the government raised taxes on the wealthiest Canadians by introducing a new top income tax rate of 33% for individuals with a taxable income of more than $200,000 per year.
Our government then proceeded with one of the most significant social policy innovations in a generation; that is, bringing in the new Canada child benefit. The CCB is giving nine out of 10 families and their children more money every month to spend on everything from school supplies to sporting equipment. Families who benefit saw an average increase in child benefits of almost $2,300 in the 2016-17 fiscal year. The CCB has tremendously helped families in my riding of . Raising a family in Canada can be challenging and the CCB has helped ease the financial burden for Brampton North families who need it most.
Our government is also taking important steps to make sure that Canadians today have a more secure and dignified retirement in the future. Just last week, we marked the final step in implementing the enhancement to the Canada pension plan.
Taken together, these actions will help strengthen and grow Canada's middle class and, in turn, our economy and our country will be stronger than ever before.
Let me turn to the issue brought forward by this motion today; that is, ensuring a fair tax system for Canada. We believe every Canadian must pay their fair share of taxes, period. Underground economic activity, tax evasion, and aggressive tax planning stand in the way of tax fairness. Too often, it is hard-working, middle-class Canadians, like those in my riding of , who pick up the tab for the selfish motives of certain individual businesses that look to gain an unfair advantage. This is totally unacceptable. That is why our government has taken, and continues to take, action to crack down on tax evasion and to combat aggressive tax avoidance.
Part of the government's strategy to fight these problems includes providing the Canada Revenue Agency with sufficient resources to administer and enforce tax laws. For example, budget 2016 committed $444.4 million to enhance the CRA's efforts to crack down on tax evasion and to combat tax avoidance by taking a number of actions. These include hiring additional auditors and specialists, developing robust business intelligence infrastructure, increasing verification activities, and improving the quality of investigative work that targets criminal tax evaders.
Budget 2016 also invested $351.6 million to help the CRA improve its ability to collect outstanding tax debt, which will help collect approximately another $7.4 billion in tax debt owed to the Government of Canada.
Furthermore, Canada's tax system requires ongoing adjustments to ensure it is functioning as intended and contributing to the objective of the economy that works for everyone. That is why internationally Canada is actively engaged in coordinated multilateral efforts to address base erosion and profit shifting, also known as BEPS, which refers to international tax planning arrangements undertaken by multinational enterprises to inappropriately minimize their taxes.
Here at home, we are working to prevent the ability of high net worth individuals to use private corporations to inappropriately reduce or defer their taxes. To help address this, budget 2016 introduced measures to prevent business owners from multiplying access to the $500,000 small business deduction using complex partnership and corporate structures; and to close loopholes that allow private corporations to use a life insurance policy to distribute amounts tax-free that would otherwise be taxable.
The measures I mentioned today are by no means exhaustive, but they do give a good indication of the attention that the government is placing on combatting tax evasion and avoidance. Seeking out tax evaders and avoiders is about fairness and Canadians want fairness
By taking action to prevent tax evasion and close tax loopholes, we will improve the fairness and integrity of the tax system, and contribute to fiscal sustainability, both at home and abroad. We believe that our plan is the right one to improve the integrity of Canada's tax system.
Madam Speaker, I would first like to say that when the economy is working for the middle class, the country is working for all Canadians.
Since our government came to power, we have tried to restore the confidence and optimism of Canada’s middle class and help people seeking to join it. That is the case in Rivière-des-Mille-Îles and it is the case everywhere in Canada, and we continue to be determined to do even more.
One of the first things done by our government was to reduce taxes for the middle class. We have reduced the federal income tax rate to 20.5% from 22%, for 2016 and the years after that. This tax reduction is already benefiting nearly nine million Canadians. Individuals without spouses who benefit from this will see their tax burden lightened by an average of $330 each year, and couples who benefit will have their burden lightened by an average of $540 each year. That means that these people will have more money in their pockets, and that will result in a stronger middle class.
To help finance this tax reduction for the middle class, the government raised taxes for the wealthiest Canadians by introducing a new personal income tax rate of 33% for individuals with taxable income in excess of $200,000 per year.
Our government then implemented one of the most important social policy innovations in a generation: the new Canada child benefit, which is helping 10,300 families, with 18,870 children, in my riding. The benefit means that nine out of 10 families with children are receiving more money each month that they can spend on things ranging from school supplies to sports equipment
The families this measure helps have seen their child benefits rise by nearly $2,300 per year, for the 2016-2017 benefits. For myself, my constituents in Rivière-des-Mille-Îles receive about $530 per month. Some of the constituents I meet tell me how important the Canada child benefit is for them and for their children’s welfare.
Our government is also taking important steps to ensure that young Canadians today will be able to enjoy a more secure and dignified retirement in the future. Only last week, we completed the final stage in the implementation of improvements to the Canada pension plan. This set of measures will help to strengthen the middle class and move middle-class Canadians forward.
I would now like to address the issue raised by today's motion, which is ensuring the fairness of Canada's tax system. The underground economy, tax evasion, and aggressive tax planning stand in the way of tax fairness, and too often it is hard-working middle-class Canadians who foot the bill for the selfishness of individuals and businesses looking to gain an unfair advantage.
Let us be clear: that is totally unacceptable. That is why our government continues to take action to tackle tax evasion and combat aggressive tax avoidance. As part of its strategy to counter these practices, the government provides the Canada Revenue Agency with sufficient resources to implement and enforce tax laws.
For example, the 2016 budget included a commitment of $444.4 million to allow the Canada Revenue Agency to do even more to crack down on tax evasion and combat tax avoidance using various measures. These measures include hiring additional auditors and specialists, developing solid business intelligence infrastructure, intensifying audit activities, and improving the quality of investigative activities that target cases of criminal tax evasion.
The 2016 budget also allocated $351 million over five years to the Canada Revenue Agency to help increase its ability to recover outstanding tax debts, which will facilitate the collection of $7.4 billion in taxes payable to the government and to Canadians.
Furthermore, Canada's tax system requires constant adjustments in order to function as intended and help us achieve an economy that serves all of the people. That is why Canada is actively involved in coordinated multilateral activities at the international level to combat base erosion and profit shifting, namely international tax planning mechanisms used by multinationals to inappropriately reduce their taxes to a minimum.
In Canada, we are working to block the ability of wealthy individuals to use private companies to inappropriately reduce or defer their taxes. To address this concern, the 2016 budget contained measures to prevent business owners from taking advantage of the $500,000 small business deduction more than once by using complex corporate and partnership structures, and to eliminate loopholes that allow private companies to use a life insurance policy to distribute amounts tax-free which would otherwise be taxable.
The measures that I have mentioned today are by no means exhaustive. Nevertheless, they do provide a good indication of the attention the government is giving to combatting tax evasion and avoidance. Measures targeting people who engage in tax evasion are about fairness. By working to prevent tax evasion and eliminate tax loopholes, we will improve the integrity of the tax system and contribute to the sustainability of public finances at home and abroad.
I am firmly convinced that our plan is the one needed to enhance the integrity of the Canadian tax system.
Madam Speaker, before I begin my speech, I would like to inform you that I will be sharing my time with the member for .
I am pleased to rise today to talk to an issue finally that really matters to people in my riding, and if the motion were to pass, would actually do something for them. We spend a lot of time talking about various issues which the different parties bring forward, but I am not always convinced that the subject is really top of mind for my constituents.
The idea that people who in half a day make what an average Canadian worker makes in an entire year send that money to Barbados and do not pay tax on it, or who decide around the corporate board table to get paid in stock options instead of a salary and not pay the same tax on that money, is outrageous.
There is an important principle at stake here. It is one which separates the NDP from the other two traditional parties in the House which have spent a long time working together to find ways to help people who are already rich and powerful shelter their money and not pay their fair share of taxes. That is something on which Canadians want to see us take action. People where I am from want to see us take action on this.
People go out to work every day and they pay their fair share of taxes. They are also looking at their families and noticing that as their parents and grandparents age, they need help with health services. The cost of drugs is high. Yet, we have heard successive Liberal and Conservative governments, no matter what they promise in their platforms, plead poverty. They claim not to have money for a national pharmacare program. They claim it is too expensive and ask where they would get the money. It is pretty hard to believe government, whether it be Conservative or Liberal, that we do not have the money, when we see the amount of money that is bleeding out of the Canadian economy every year because people who make obscene amounts of money do not want to pay their fair share of taxes.
It is hard to believe that we do not really have the money. The problem is that the Liberals and Conservatives would have to stand up to their friends in order to get it. Canadians deserve a government that is willing to stand up to corporate Canada and say, “You are here making money in Canada. You have to pay your fair share.” Companies are making money in Canada and they are making that money because Canadians go to work every day and produce value for those companies. Government should stand up and tell them to pay their fair share so that when a mother gets sick and needs a certain prescription drug regimen, she can afford it. When Canadians are going out to work to produce that value for those companies, the companies should chip in their fair share so that their workers can have proper child care so that their kids have a safe place to be during the day. The workers are producing value for the people and companies that cannot be bothered to pay their fair share in taxes but instead think that sending their money to Barbados is an acceptable way to conduct themselves.
This issue is one of the main drivers for my participating in politics. I look at the old line parties, be they Liberal or Conservative, and the way they fold when powerful, rich folks come to Ottawa to tell them what to do, and I think it is disgusting. Canadians deserve better.
As an example, we thought that maybe the Liberal Party was about to kick its old habit of kowtowing to the rich and powerful in Canada in the last election when the Liberals agreed to close the stock hold loophole for CEOs. It is in black and white in the Liberals' platform. That was a promise. Nothing changed from before the election to after the election, except that the Liberals were elected. They knew they had four years in government and they did not have to keep their promises to Canadians. That was their attitude. The only thing that changed was that they were elected. Then the Bay Street lobbyists came to Ottawa, and the evidence is in the lobbying registry, and spoke to their buddy the minister of high finance and said, “Mr. Minister, please, you can't do this. It is going to cost me so much money I am going to have to get the “B” class yacht instead of the “A” class yacht.”
Can the Liberals go to Canadian families and tell them there is not going to be a national pharmacare plan? Can they go to Canadian workers, the ones who are working for me, and tell them they cannot get reliable access to safe child care because people do not want to be embarrassed when they go down south for a month and their yacht is not the nicest on the dock? Imagine the nerve and the gall of what is being said in those private conversations and what is being asked of ordinary Canadians who not only need help but are working and paying their fair share for a system in this country that they want to deliver on the things they need, be it child care, be it a drug plan, be it investments in home care.
We have a government that is unwilling to go after tax cheats. It is giving them amnesty. Then the government is saying it does not have enough money for home care so the provinces are going to have to accept the Harper escalator on health care. If the provinces want just a little home care money that the government eked out for Canadians, which was an election promise that was to be flowed immediately, the government managed to find a little of that money but it is not going to give it to the provinces unless they sign on to the Harper escalator.
That is where politics has gone in this country under the Liberal government. It is using promises it made and money that should have been there, that the government promised would be there, to hold provinces hostage unless they accept less health care funding overall, funding which would have a direct benefit to Canadian working families. In the meantime, the government is instructing the CRA to give amnesty to the people who are taking money out of the Canadian economy and sending it elsewhere. It is reprehensible.
We could talk about other current issues, for instance, worries about whether we have enough resources to accommodate refugees, whether we are doing our fair share when it comes to first nations and giving them what they are owed in order to get those communities back on their feet. Again, governments plead poverty, be it a Liberal government or a Conservative government. It ends up the same.
The fact of the matter is we produce a lot of wealth in Canada. If the people who are making the most, those at the top, would pay their fair share, we could afford to do these things.
There is a revenue problem in Canada. It is not because the revenue does not exist. It is not because the wealth is not being produced. It is not because we cannot pay for these things. It is because the government will not pay for it, because it means challenging its buddies. That is not fair to ordinary Canadians who are paying their fair share, who are going to work every day, and who thought they were voting for a government that was willing to do that.
The government talks about its tax cut for the middle class. The Liberals cannot define the middle class, so it is interesting to hear them use the term all the time. In fact, they put in writing that they could not define the middle class. At least we can say that the middle class according to the Liberals does not include anyone who makes under $45,000 a year.
Then the Liberals promised they would make up for that tax cut at least by instituting a new tax on those making the most, and that that was going to be revenue neutral. Well, they did bring in that tax increase, but they did not do it on the basis of paying for the tax cut for the middle class. The people who got the most benefit out of that tax cut already make six figures. There we have it again.
The Liberals were going to do the Robin Hood thing. They were going to tax the rich, bring in a whole new tax bracket. They were going to pay for this tax cut that was supposed to be for the middle class but actually ended up being for people making six figures, and they could not even get that right. At the end of the day, they actually reduced government revenue to give a tax cut, the maximum benefit of which went to people making six figures, and in the meantime granted amnesty to the people we know are Canada's worst tax cheats.
How does that square with the notion that the Liberals are going to courageously go after Canada's wealthy to give a fair shake to ordinary Canadian workers? For those in the House who are wondering and those at home who are wondering, it does not square. That is why I am glad to be sitting in a caucus of 44 people who are willing to say so and put it on the record, because if it was up to the other two parties, no one would be saying that much.
It is important to speak truth to power. It is something the Liberals promised to do, but when the Bay Street lobbyists came and the decision point came and they actually had to do the deed, they actually had to say, “Sorry, rich guys whom I really want to be friends with because you are just so cool, and maybe I will get to ride on your helicopter to a private island, but we are going to have to do something that costs you money.”
When it came down to it, the Liberals could not do it. They just could not do it. The Liberals just want to fit in so badly with the rich and powerful, when they should be trying to fit in with ordinary working Canadians who go to work every day and pay their taxes, and who want to be part of a country that assesses a fair rate on everyone and does not say, “Because you make a lot of money, you are off the hook.”
What is the message being sent to Canadians here? The message is that if they get caught not paying quite enough tax but make a regular income, the Liberals will come after them. The problem is they did not cheat enough. If they had just cheated more, then they would be in the category of people the Liberals do not really want to go after.
The message being sent to Canadians is not to cheat a little bit, but to cheat a lot. They can only do that if they make enough money to cheat that much, and if they do, the Liberals will want to be their friends. Otherwise they are just ordinary Canadians, and the Liberals cannot give them the time of day after getting elected.
Madam Speaker, we have been hearing about austerity and cuts for years. We are familiar with the refrain of successive governments in Ottawa, Quebec, and elsewhere in the world, who have been feeding us the same message for at least 30 years, the same reductive solution of having to tighten our belts and live within our means.
It is as though the public institutions that we have legitimately established were an extravagance, as though the state structure built in Quebec and Canada to better educate ourselves, to take better care of ourselves, and to develop our economy were but a fantasy.
The entire time that a thousand and one cuts were being made, the system was haemorrhaging billions of dollars. Untold billions of dollars are leaving our tax system as a result of tax evasion and tax avoidance orchestrated by accounting firms big and small on behalf of their clients, the richest individuals and businesses in Canada. They are the wealthiest 1%. These people send the profits they make in Canada to tax havens and refuse to contribute to society like everyone else does.
This has been going on for years. Not enough has been done and ordinary people have been asked to pay more for too long. It is like a plumber coming to the house and telling us that instead of repairing the huge leak that is spewing water in the street, we will have to learn to live with lower water pressure.
The use of tax havens in the Caribbean or even the British Isles, for example, where billions are tucked away, has reached historic levels. Never before have we seen such an abuse of the tax system, and it is an international problem. In 2015, the last year the Conservatives were in power, $40 billion were transferred from Canadian bank accounts to about ten tax havens. Since 1990, $270 billion have disappeared.
Every year, billions of dollars are stashed away in tax havens. As if that were not bad enough, the government also gives the wealthy all kinds of little tax goodies to help them save. That costs the treasury $100 billion a year. The Canadian Centre for Policy Alternatives is very diligent about reminding us of that.
It is easier to tell Quebeckers and Canadians that they are not living within their means than it is to confront the wealthiest 1% of CEOs about the things they do that are hurting everyone.
This is happening right before our very eyes. We are talking about multinational corporations whose products we buy every day. People who buy their coffee at Starbucks probably know that the company was at the centre of a scandal in the United Kingdom because it went for years without paying taxes by using a strategy that enabled it to remove its profits from the country to give the impression that it was not making enough money in its stores there.
Canadian businesses and banks use the same strategy. In 2009, TD Bank paid just 7.6% in taxes when everyone else was paying 32%. BCE reported profits of $30 billion from 2004 to 2014 but paid a mere 5% in taxes. Gildan, a Montreal-based textiles manufacturer that makes t-shirts all over the world and has benefited substantially from a number of government subsidies, makes hundreds of millions in profits every year, but paid no taxes in 2009, 2010, 2011, or 2012 thanks to an address in the Caribbean.
That is all it takes to keep billions of dollars out of the Canadian tax system, and more often than not, it is completely legal and even condoned by our governments.
How is it that these companies seem to think that they do not have any responsibility to society and they do not have to contribute? How is it that our governments agreed to turn a blind eye to this sort of tax avoidance, when they have been saying for years that they need to make cuts to hospitals, schools, rail regulations, and our presence on the international stage, when they are still saying that there is not even enough money to give seniors in long-term care facilities baths?
When asked about the consequences of such practices by the CBC, André Lareau, a professor of tax law at Laval University, had this to say:
|| The net effect is less taxes collected by authorities in Quebec and Canada.
|| With millions of dollars saved by Bombardier and millions of dollars saved by all companies that use this type of vehicle, there is no way to win for Quebec or Canada, which are short a phenomenal sum.
Moreover, all this is legal. In fact, Professor Lareau said, “Canada has given them permission to do this.” The Canadian government is basically encouraging the largest companies to take a tax holiday. Don't ask where the potholes come from.
However, our fat cats are not the only ones exploiting the flaws in our system; we now turn a blind eye to web giants who are stuffing themselves in the online shopping buffet. E-commerce is exploding, yet the government here in Ottawa, like the Conservative government before it, continues to treat online providers from here and elsewhere differently.
While a business here has to pay taxes on its business transactions on the Internet, a company that does business online in Canada doesn't have the same obligation, a situation that is making less and less sense as e-commerce grows.
That is likely why the OECD is now proposing standards for the taxation of online goods and services. Basically, the believes that, if a corporation has no head office or physical presence in Canada, it is not engaged in commercial activity here. He may be right when it comes to cobblers and pizzerias, but certainly not for something like Facebook, which has millions of users in Canada, and certainly not for Amazon or Apple, which compete directly with businesses here.
Any other Canadian business that dares compete with online companies is immediately at a disadvantage, simply because it will be taxed. This is especially difficult in the media industry, which is going through a very tough time. The editor of the Winnipeg Free Press pointed out that Canadian readers of the online edition are taxed on their subscription, but they are not taxed when they subscribe to the New York Times online edition. Go figure.
Five or ten years ago, companies' advertising budgets were divided between radio, Quebec and Canadian television, and national and regional media, both print and digital. Today, however, 80% of those budgets go directly out of the country, through ad placements on Facebook and Google. This amounts to hundreds of billions of dollars a year that are leaving the country without being taxed. Our media are being bled dry. Even worse, in some cases, these foreign online ad placements are even tax deductible. We know very well that, in the case of the biggest web-based multinationals, this money literally disappears.
In the United Kingdom, instead of registering its British advertising revenue and being taxed in the U.K., Facebook recently decided to move everything to Ireland and the Cayman Islands in order to avoid paying token amounts in taxes. When word got out, people reacted negatively and Facebook did some back-pedalling, after a few years of a little tax holiday, because the public got upset, but more importantly, because political officials took responsibility.
Yes, I am looking at the government.
Since 2015, the British government has been a pioneer in charging an extra 25% levy on foreign corporations that try to avoid paying taxes. That was a tough pill to swallow for the likes of Facebook and Amazon, who finally started paying their taxes after having processed all their transactions through Luxembourg for years. The moral of the story is: where there is political will, tax avoidance can be beat, including when it comes to companies that do business online.
The statement by British finance minister, George Osborne, could not have been clearer: he said that their corporate tax rate was among the lowest in the world, but England expects those taxes to be paid.
Here in Ottawa, we can only dream of our having that much political courage. In the meantime, this wide-scale tax avoidance is doing immeasurable harm to businesses in Quebec and Canada.
Last weekend's edition of La Presse called this the Swiss cheese effect because it could create holes in Quebec's economy. The same article quoted Peter Simons, the president of La Maison Simons, a very successful and well-known Quebec retailer that just opened a new store in the nearby Rideau Centre. Mr. Simons talked about how big of a problem this is for electronic commerce. He pays his taxes and his customs fees, and he pays for his products and buildings, which are taxed. However, his competitors do not do any of that.
He said it very clearly: taxes are his biggest expense. He added that it is not right for a company that conducts 90% of its operations in North America to send 99% of the profits to Luxembourg. He also added that the things that cost the most in a society are the people, education, roads, and health, and that, as a society, we need to fund our values. He went on to say that he worries that the government will fall back into a pattern of making cuts without identifying root causes. He said that he does not have all the answers but that he believes that everyone should have to pay their fair share and participate in society. Companies cannot come to Quebec and Canada and expect to do business without taking any responsibility.
That is from one of our own business people. He is worried that governments are not listening to him and not getting his message. Mr. Simons added that he is not sure the government sees any urgency here and that the legislative framework must be redefined.
The weekend edition of La Presse said the same thing: Our elected representatives have to do a better job of helping merchants rise to those challenges and stopping multinationals from getting around the rules.
I wish I could say that I believe Canada will change the rules to put a stop to tax havens, but the truth is that Conservative and Liberal party cronies are the ones who created those tax havens in the first place. Here are just a few of them: Graham Towers, a former governor of the Bank of Canada, was an advisor to the Government of Jamaica when that country became a tax haven. Jim MacDonald, once a high-ranking Conservative Party lawyer, drafted the Cayman Islands' tax policies when that country became a tax haven. Donald Fleming, a former Canadian minister, put together the Bahamas' tax measures when that country became a tax haven in the 1960s.
Paul Martin, a businessman and former Canadian prime minister, has a company registered in Barbados. In other words, lots of people—