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37th PARLIAMENT, 2nd SESSION
Standing Committee on Foreign Affairs and International Trade
EVIDENCE
CONTENTS
Tuesday, November 19, 2002
| ¿ | 0910 |
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The Acting Chair (Mr. John Harvard (Charleswood—St. James—Assiniboia, Lib.)) |
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Mr. Bryon Wilfert (Parliamentary Secretary to the Minister of Finance) |
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The Acting Chair (Mr. John Harvard) |
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Mr. Stockwell Day (Okanagan—Coquihalla, Canadian Alliance) |
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Mr. Bryon Wilfert |
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Mr. Stockwell Day |
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Mr. Bryon Wilfert |
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Mr. Stockwell Day |
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Mr. Bryon Wilfert |
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Mr. Stockwell Day |
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Mr. Bryon Wilfert |
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The Acting Chair (Mr. John Harvard) |
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Mr. David Sénecal (Acting Chief, Tax Treaties Section, Tax Legislation Division, Department of Finance Canada) |
| ¿ | 0915 |
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Mr. Stockwell Day |
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Mr. David Senécal |
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Mr. Stockwell Day |
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Mr. David Senécal |
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Mr. Stockwell Day |
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Mr. Brian Ernewein (Director, Tax Legislation Division, Department of Finance Canada) |
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Mr. Stockwell Day |
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Mr. Bryon Wilfert |
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Mr. Stockwell Day |
| ¿ | 0920 |
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The Acting Chair (Mr. John Harvard) |
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Ms. Pauline Picard (Drummond, BQ) |
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Mr. Bryon Wilfert |
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The Acting Chair (Mr. John Harvard) |
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Mr. Sarkis Assadourian (Brampton Centre, Lib.) |
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Mr. Bryon Wilfert |
| ¿ | 0925 |
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Mr. Sarkis Assadourian |
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The Acting Chair (Mr. John Harvard) |
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Mr. Bryon Wilfert |
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The Acting Chair (Mr. John Harvard) |
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Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.) |
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Mr. Bryon Wilfert |
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Mrs. Marlene Jennings |
| ¿ | 0930 |
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The Acting Chair (Mr. John Harvard) |
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Mr. Bryon Wilfert |
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Mrs. Marlene Jennings |
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Mr. Adrian Norfolk (Deputy Director, Human Rights, Humanitarian Affairs and International Women's Equality Division, Department of Foreign Affairs and International Trade) |
| ¿ | 0935 |
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Mrs. Marlene Jennings |
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Mr. Adrian Norfolk |
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Mrs. Marlene Jennings |
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The Acting Chair (Mr. John Harvard) |
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Mr. John Duncan (Vancouver Island North, Canadian Alliance) |
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Mr. David Senécal |
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Mr. John Duncan |
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Mr. David Senécal |
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Mr. John Duncan |
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Mr. David Senécal |
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Mr. John Duncan |
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Mr. David Senécal |
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Mr. John Duncan |
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Mr. David Senécal |
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Mr. Bryon Wilfert |
| ¿ | 0940 |
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The Acting Chair (Mr. John Harvard) |
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Ms. Aileen Carroll (Barrie—Simcoe—Bradford, Lib.) |
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The Acting Chair (Mr. John Harvard) |
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Mr. John Duncan |
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The Acting Chair (Mr. John Harvard) |
CANADA
Standing Committee on Foreign Affairs and International Trade |
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EVIDENCE
Tuesday, November 19, 2002
[Recorded by Electronic Apparatus]
¿ 
(0910)
[English]
The Acting Chair (Mr. John Harvard (Charleswood—St. James—Assiniboia, Lib.)): Members, I'd like to call this meeting to order. I'm sitting in for Dr. Patry, who has a commitment elsewhere.
We're here today to consider Bill S-2, an act to implement an agreement, conventions and protocols concluded between Canada and Kuwait, Mongolia, the United Arab Emirates, Moldova, Norway, Belgium and Italy for the avoidance of double taxation and the prevention of fiscal evasion and to amend the enacted text of three tax treaties.
My understanding is that the parliamentary secretary to the Minister of Finance, Mr. Wilfert, has a very short overview of the legislation. I understand it's not contentious. However, I guess that adjudication will be left, as usual, to the opposition.
First we'll hear from Mr. Wilfert.
Mr. Bryon Wilfert (Parliamentary Secretary to the Minister of Finance): Thank you, Mr. Chairman.
In speaking with Dr. Patry, I indicated that I could either read the whole speech or do very quick comments. It's agreed that I'll take the latter course.
Colleagues, Mr. Chairman, this is Bill S-2, the Tax Conventions Implementation Act, 2002. As the chair indicated, it deals with a number of states, including Kuwait, Mongolia, Moldova, and the United Arab Emirates. We have 75 agreements currently dealing with tax treaties around the world. These treaties will provide desired assurances, by promoting mutual understanding of how the tax system works in one country and how it interfaces with another. The understanding helps remove uncertainties about tax implications associated with doing business, visiting, or working abroad.
The issue of double taxation, I'm sure, is familiar to all members. We continue, at the Department of Finance, to work on these agreements for the benefit of Canadian citizens around the world. The speech I will deposit with the chair, but it's essentially a continuation of treaties we have, as I say, with 75 other states, giving clarity to our relationship with others and establishing limits on amounts of withholding tax etc. It's extremely useful. I would recommend that the committee review it and, hopefully, deal with it today.
Thank you.
The Acting Chair (Mr. John Harvard): Are there any questions for Mr. Wilfert or any of the officials available to us?
I should introduce the officials who are here in case we have questions. We have, from the Department of Finance, Brian Ernewein, director, tax legislation division, Tax Policy Branch, and David Senécal, acting chief, tax treaty section, tax legislation division; and from the Department of Foreign Affairs and International Trade, Adrian Norfolk, deputy director, human rights, human rights, humanitarian affairs and international women's equality division.
Mr. Day.
Mr. Stockwell Day (Okanagan—Coquihalla, Canadian Alliance): Thank you, Mr. Chair.
I have some questions. There's a comment related to double taxation. Obviously, we're trying to avoid that, but double taxation does exist, does it not? For instance, there's a note about off-shore activity oil and gas with Norway. It leads one to think that both countries can tax a person engaged in those activities. Is that correct?
Mr. Bryon Wilfert: It depends on the length of stay an individual has.
Mr. Stockwell Day: So it's up to a month.
Mr. Bryon Wilfert: Yes, that's correct.
Mr. Stockwell Day: You can be double taxed, then.
Mr. Bryon Wilfert: Depending again on the duration.
Mr. Stockwell Day: Does that vary from one country to another when we have these tax treaties?
Mr. Bryon Wilfert: I believe it does.
The Acting Chair (Mr. John Harvard): Would one of the officials like to respond?
Mr. David Sénecal (Acting Chief, Tax Treaties Section, Tax Legislation Division, Department of Finance Canada): Thank you very much, Mr. Chairman.
We have these offshore articles in a number of our treaties with countries where there are large oil and gas offshore activities, countries such as Norway and the U.K. It is true that if a Norwegian company were to come and work in Canada's offshore area, Canada would obtains the right to tax after 30 days. In return, Norway undertakes to provide relief in Norway for the Canadian taxes the Norwegian company has to pay to Canada. The treaty would operate also in the reverse situation, where Canadian companies operate abroad and the other country's given the right to tax these Canadian companies. Canada has an obligation to provide relief against Canadian taxes for the foreign tax that's paid. It's in that manner that we avoid the double taxation.
¿ (0915)
Mr. Stockwell Day: There's a reference to government workers in article 19. Is it the common practice that one of our government workers working in another country and living there will only be taxed in that country?
Mr. David Senécal: It's the opposite. We would retain the exclusive right to tax our diplomats working in another country.
Mr. Stockwell Day: Okay.
The language would suggest that directors' fees may be taxed in both countries. Is that correct?
Mr. David Senécal: Yes, that is true. Given the fact that sometimes a director basically resides in another country or the decisions are taken outside the country, sometimes it's difficult for the country where the company itself is resident to tax directors who may be non-residents of that country. This just makes it clear that the country where the company is resident has the right to tax directors' fees, even though it's sometimes difficult to determine where the director is actually operating from.
Mr. Stockwell Day: Is it generally true, then, that Canada works to make sure a Canadian working somewhere else as a director, an oil field worker, or whatever is not in fact taxed twice? Is that our general approach and a general alleviating provision?
Mr. Brian Ernewein (Director, Tax Legislation Division, Department of Finance Canada): I would respond to that, if I may, Mr. Chairman.
One of the fundamental purposes of tax treaties is to relieve double taxation. As Mr. Senécal has said, that doesn't mean only one country will always tax. It is possible that both countries, under the terms of a tax treaty, will have the authority to tax income of a certain nature. That said, where it arises, treaties invariably, I believe, will try to integrate the two taxes by ensuring, as a general matter, that the tax imposed by one country can be applied as a credit against the tax imposed by the other country, so that in effect, you end up paying only an integrated single tax.
Mr. Stockwell Day: Okay.
With pensioners previously resident and citizens of Great Britain now in Canada, there was an aggravated concern for a number of years. Has that been resolved? They were stating that they were being taxed by Great Britain on their pension and also here in Canada.
Mr. Bryon Wilfert: It's not dealt with in this particular legislation. The issue of pensioners is outside the scope of this treaty and international taxation treaties generally. However, with the issue of British pensioners, there was some movement, but I'm afraid I don't have the information in front of me. I don't know whether either of our colleagues has.
Mr. Stockwell Day: Mr. Chairman, if that's under Mr. Wilfert's area of expertise, I can follow up with him directly on that.
¿ (0920)
The Acting Chair (Mr. John Harvard): Thank you, Mr. Day.
Madame Picard.
[Translation]
Ms. Pauline Picard (Drummond, BQ): Could someone enlighten me? I don't believe this bears any relation to Bill S-2.
I'm curious as to how a country like Moldova, which is not a member of the United Nations, is able to sign major conventions. How is it that this country can sign international agreements and conventions without being a member of the UN?
[English]
Mr. Bryon Wilfert: These treaties are done on a bilateral basis, following traditional international norms. As I say, we have signed 75 treaties and they are on a one-to-one basis. There is a general formula that is used, but regardless of whether they are members of the UN or any other international body, Canada, as do other states, acts in the national interest by developing these treaties on a one-to-one basis.
The Acting Chair (Mr. John Harvard): Thank you.
Mr. Assadourian.
Mr. Sarkis Assadourian (Brampton Centre, Lib.): Thank you very much.
I have some questions regarding this double taxation agreements and humanitarianism briefing note. You mention seven countries, Norway, Belgium, Italy, UAE, Mongolia, Moldova, and Kuwait. The first three you passed, I guess, with flying colours. With the other four, you have some concerns as you go along.
The UAE agreed “only to the Convention on the Elimination of All Forms of Racial Discrimination and the Convention on the Rights of the Child”. You say there are some violations, but not very serious violations. You're concerned with general lack of transparency and that there are no elections or legal political parties. Mongolia has agreed with six humanitarian human rights instruments, has no very serious human rights violations, but you have concerns with the penal system. Muldova shows general human rights respect. Kuwait agrees with all six human rights treaties, but Canada remains concerned about denial of political rights for women.
Overall, with all these human rights situations, are you quite happy with the way they are, or do you see any room for improvement in the future?
Finally, if Canadian citizen women do business in Kuwait, what happens to their rights? You tell me here they do not uphold equal rights. Would that be with the business taxation? Does it have something to do with the political rights of a Canadian person doing business overseas, in this case in Kuwait?
Mr. Bryon Wilfert: We're never satisfied. When it comes to the issue of human rights, Canada's policy has been and continues to be a policy of engagement, working with states. As you point out, the degree to which some have fulfilled the requirements may vary. You mentioned women in Kuwait. In the last vote in the Kuwaiti legislature the right for women to have the vote lost by one. That, in fact, has improved significantly over the years, and who knows about the next time? Obviously, we continue to interact with those states. We continue to pursue both quiet diplomacy and direct engagement in public forums.
Essentially, all foreign nationals who go to states abroad have to be aware--and they are certainly advised so by Foreign Affairs--that they are in other jurisdictions and must be cognizant of and respect the rules in those particular states.
We do feel, at least at the Department of Finance--and we have, of course, been working very closely with Foreign Affairs--that the agreements we have submitted to Parliament do comply in the areas that, under tax legislation, we are seeking. Again, as I said on the first part of your question, we are never satisfied and we continue to engage.
¿ (0925)
Mr. Sarkis Assadourian: Mr. Chairman, I am pleased that the department highlighted these points, so we, as parliamentarians, can follow up as we go along in the future to make sure these points are addressed. I reallly appreciate the work the parliamentary secretary for Finance did to bring these issues to our attention.
Thank you very much.
The Acting Chair (Mr. John Harvard): Thank you.
Mr. Bryon Wilfert: Perhaps I can just say, Mr. Chairman, you will see this with any future tax treaties. I think it's very important. I thank my colleague for his remarks.
The Acting Chair (Mr. John Harvard): Thank you.
Ms. Jennings.
[Translation]
Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you very much, Mr. Chairman. I have several questions concerning respect for basic human rights in countries with which we have concluded tax conventions.
First of all, does our government have a policy setting out clear criteria for concluding a tax convention with a country with a record of human rights abuse? Do we assess the situation in a particular country before deciding, for example, not to conclude a tax convention with it because it hasn't signed any international conventions or, in the case of a country that has signed such conventions, because there is evidence of serious, blatant violations of these conventions? Does the government have such a policy?
[English]
Mr. Bryon Wilfert: The policy is that where Canadians are doing business abroad, we have a responsibility, within reason, to protect those nationals. Where we can simplify and where we can develop treaties that are in the interests of both states in respect of economic engagement, we do so. We also recognize issues such as you have indicated on human rights, and we do business, as you know, and we are engaged in many forms with states as varied as Cuba and the People's Republic of China. We would not say they're all models of upholding human rights, but some states, such as the United States, have decided not to engage directly with Cuba, although even that has changed, as you know, with the large economic delegation that went to Cuba recently, including the Governor of Minnesota, Jesse Ventura.
From the finance department's viewpoint, we look at how we can protect Canadian nationals. In conjunction with Foreign Affairs, we make sure, if those economic activities are going on, we get these treaties in place. At the same time, where there are violations of human rights, that's a second track we deal with. Obviously, we point this out, and certainly, the Prime Minister has pointed those things out, both publicly and privately, with everyone from Jiang Zemin to Castro. So in fact, there are criteria. We have rules we establish with those states. We have 75 at the moment, and we may have states that do not want to engage with these tax treaties. It's a slow process.
[Translation]
Mrs. Marlene Jennings: If I understand you correctly, the answer is no. There is no such government policy setting out criteria on which to base our decision to conclude, or not to conclude, tax conventions with other countries based on the fact that they haven't signed any such conventions in the past, or if they have, have failed to uphold the convention terms.
Essentially, that's what you're telling me. The criteria used to determine whether or not Canada will sign a convention is the economic activity between Canadian companies and companies in the particular country in question. It's not whether or not a country is a signatory of international conventions and if it is, whether it complies with the conditions set out in these conventions.
My second question is related to one raised by Mr. Assadourian concerning women entrepreneurs. It's a known fact that in certain countries, evidence given by a woman does not carry the same weight, legally speaking, as evidence given by a man. The Canadian government cannot ignore this fact. When Canada signs tax conventions with countries like Kuwait and so forth, does it advise Canadian companies that are either owned by women, employ women or have shareholders who are women, that should a criminal or civil matter arise, any testimony given by a woman may not carry the same weight as testimony given by a man? After all, company employees can be accused of business fraud, as was the case with a Canadian firm with business dealings in one African country. Are they advised of this possibility?
¿ (0930)
[English]
The Acting Chair (Mr. John Harvard): Mr. Norfolk has indicated he would like to reply. Do you want him to go first, Mr. Wilfert, or will you?
Mr. Bryon Wilfert: I was just going to say, Mr. Chairman, when people are engaged in activities in other countries, we certainly, through Foreign Affairs, do inform them as to what they can expect. I don't want to repeat myself, but we continue to engage the issue of human rights. If you are a man or a woman going to be overseas, you have to be aware of what the rules are and avail yourself of consular officials.
I think it would be wrong to suggest, however, Mr. Chairman, that there isn't a policy. Of course, there's a policy, and the policy, again outlined in the legislation, says there are certain requirements we expect, from a Finance standpoint, in engaging in the development of a tax treaty on a bilateral basis with country X. If you're suggesting that specific criteria have to be met from a human rights standpoint, there are criteria on the books.
As to further details, I'll turn it over to Mr. Norfolk from Foreign Affairs.
[Translation]
Mrs. Marlene Jennings: Could we have a copy of this document which lists the criteria?
[English]
Mr. Adrian Norfolk (Deputy Director, Human Rights, Humanitarian Affairs and International Women's Equality Division, Department of Foreign Affairs and International Trade): I wanted to add a few things on the issue of criteria. The idea of having a set list of criteria is a pretty difficult one to approach when it comes to human rights. There are the main human rights documents, the two covenants and the four conventions, but one has to remember that the United States is only party to two or maybe three of those. The United States itself isn't party to the covenant on the rights of children or the economical, cultural, and social rights convention. So clearly, that's not the way to go.
We ask ourselves questions specific to each particular case, whether it be an export of equipment or arms or signing a trade agreement or double taxation agreement or treaties. Will the activity Canada is contemplating, whether it be exporting or signing a treaty, worsen the situation of human rights in a particular country? There is a process in place whereby these double taxation agreements, the export of arms, for example, not only go through human right lenses, but are often looked at through environment lenses as well at the department. There is a very definite process and there are questions we ask ourselves. As to the criteria, one has to pick and choose depending on the situation, but certainly there is this series of questions we ask ourselves. The main question is, is this going to worsen the human rights situation with the export of arms and defence equipment? Then there is a series of criteria. I can get you a copy of those.
¿ (0935)
[Translation]
Mrs. Marlene Jennings: What about the other matters you alluded to, such as environmental concerns?
[English]
Mr. Adrian Norfolk: Yes, we can provide you with the types of questions we ask ourselves.
[Translation]
Mrs. Marlene Jennings: Thank you.
[English]
The Acting Chair (Mr. John Harvard): I think Mr. Duncan has a question.
Mr. John Duncan (Vancouver Island North, Canadian Alliance): Yes, I do. I was curious to know if any other country has terminated a tax treaty with Canada.
Mr. David Senécal: No.
Mr. John Duncan: Has Canada ever enacted legislation to bring into force our end while the other party has not?
Mr. David Senécal: The only case I'm aware of is with Liberia a number of years ago. Currently, we have a treaty enacted in Canada with Lebanon that has yet to go through the approval process on the Lebanese side.
Mr. John Duncan: Finally, what is the circumstance of Canadians working in Taiwan? Do they fall under another treaty, are they in a vacuum, are they doubly taxed?
Mr. David Senécal: With respect to Taiwan, there have been expressions of interest on both sides over the years about possibly having some form of treaty, but it's a delicate situation, given our one China policy. We're exploring various options, but to date there's been nothing concrete arrived at. There's no treaty in place right now.
Mr. John Duncan: So the reluctance is on the Canadian side, not on the Taiwanese side?
Mr. David Senécal: I wouldn't say that is true. I think both sides are interested, and we're looking at it. In recent years Taiwan has shown a greater interest in treaties, and they're exploring this option with a number of countries, but there hasn't been very much in the way of tax treaty activity on the Taiwanese side.
Mr. John Duncan: So what is the situation for a Canadian working in Taiwan?
Mr. David Senécal: We have rules in our act that provide relief for double taxation, so we would be able to deal with any situation of double taxation. The treaties really serve to enshrine rights Canadians would otherwise have.
Mr. Bryon Wilfert: Mr. Chairman, I'd like very quickly to say, for Mr. Duncan's benefit, there are treaties in force with those 75 states, there are treaties we have signed, but not yet put in force--the ones before you today, for example--and there are negotiations that we need to conclude or update treaties with about a dozen states. The fourth category is various discussions that vary in expressions of interest by particular states with regard to a future tax treaty.
¿ (0940)
The Acting Chair (Mr. John Harvard): Thank you.
Ms. Carroll.
Ms. Aileen Carroll (Barrie—Simcoe—Bradford, Lib.): Mr. Chair, I think it's really interesting to learn all about these facets of our trade relations, human rights issues, and so on, but I really think we're here to do a bill, and we're floating somewhat. I'd like to know what the Department of Finance thinks about who's going to win the Stanley Cup too, but I think we could get on topic here.
The Acting Chair (Mr. John Harvard): I agree, it's off topic, but I thought I'd give Mr. Duncan a bit of latitude. I think we've got through it.
Mr. John Duncan: I don't accept the criticism. It's important to know the broader context of some of the discussion.
The Acting Chair (Mr. John Harvard): All right, thank you.
If there are no further questions, we'll proceed to clause-by-clause. As usual, consideration of clause 1 is deferred.
(Clauses 2 to 12 inclusive agreed to)
(Schedules 1 to 7 inclusive agreed to)
The Acting Chair (Mr. John Harvard): Shall clause 1 carry?
Some hon. members: Agreed.
The Acting Chair (Mr. John Harvard): Shall the title carry?
Some hon. members: Agreed.
The Acting Chair (Mr. John Harvard): Shall the bill carry?
Some hon. members: Agreed.
The Acting Chair (Mr. John Harvard): Shall I report the bill to the House without amendments?
Some hon. members: Agreed.
The Acting Chair (Mr. John Harvard): That's all the work we have before us with respect to the bill. The bill is finished as far as this committee is concerned. Thank you everyone, this meeting is adjourned.