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View Matthew Dubé Profile
View Matthew Dubé Profile
2018-11-27 11:52 [p.24008]
Madam Speaker, the good news is that despite this “man cold”, as my wife calls it, my voice seems to be back. I hope it will stick around for the next 15 minutes so that I can speak to budget implementation act, 2018, No. 2. Before getting to what is in the bill or, more to the point, what is not, which might make up the bulk of my comments, I want to talk about the process.
After all, this is an omnibus bill, like the ones we saw so often under the previous government. The current government actually campaigned on a pledge to end the use of omnibus bills. The Liberals not only broke that promise, but they are constantly introducing omnibus bills. They use them not just for budgets, but also for other areas like public safety, transport and justice. We keep getting bills that are harder and harder for parliamentarians to study in any meaningful way.
I may be mistaken about the numbers, which we can check, but the mere fact that we can evoke this type of image says a lot. The Conservatives' first omnibus bill, Bill C-38, which was introduced in 2012 in the last Parliament, showed how abusive this practice had become. The bill was the nadir of this anti-democratic tendency, seeking to undermine the employment insurance program and eliminate the already inadequate environmental assessment process. The bill was hundreds of pages long.
If we were to combine the Conservatives' first omnibus bill from 2012 with the Liberals' first omnibus bill—not the one we are currently debating—we would have a bill the same size as the one before us, which is over 800 pages long.
That is completely ridiculous. I gather some of us are burning the midnight oil in our offices to read the bill. Some members say that they are sick of looking at the four walls of their offices, so they go read it at home. However, let us be honest. The idea that we have the time to consult our constituents, speak to stakeholders on the various files that critics are responsible for, read up on subjects of interest to MPs, and also read Bill C-86, including all the acts it amends, is simply unrealistic.
Some might say that this violates our parliamentary privileges. I am not looking to start a debate on privilege, but I do think it is important to point out how hard this makes it for us to do our jobs.
Even setting aside the size of the bill, the weight of it, and the rule against using props during debate in the House, I would advise my constituents not to print it out. It would be a waste of paper. The thing is massive.
On top of introducing a massive bill, the government has moved time allocation. Not only is it limiting debate in the wider sense by introducing a bill that is extremely difficult to study and therefore to debate, but it is also limiting the time for debate. In 10 or 20 minutes, the normal length of a speech in the House, it is impossible to address every issue. Plus, the government wants to limit the time for debate. This means that we, as the second opposition party, get to put up about eight speakers at most, out of about 40 or so MPs.
Some might say that the budget process, and therefore the budget implementation bill, are among the most important duties of the federal government. The fact that less than one-third of the members of a recognized opposition party get a chance to speak is a real problem.
Let us put the procedural issue aside, since we could talk for ages about this broken promise. I also want to talk about what is missing from this bill and, by extension, from the Liberals' budget. Unfortunately, the Liberals have neglected these elements too often over these past few years, since they came to power.
I would like to focus on a few aspects in particular. First, the government is still not charging web giants sales tax, even though that is a relatively simple matter. It is a matter of fairness and common sense.
When I was in my riding during the last parliamentary recess, I spoke with a constituent who told me that that is today's reality. We now get services via the Internet. That is how we download music, movies and television shows.
We are not asking the government to reinvent the wheel or to go against an existing trend. We are asking it to do two things. First, we are asking it to put all businesses on a level playing field. If Canadians order goods or services online, then they should have to pay sales tax the same way they would in a regular store. That may seem obvious to those watching at home, but the Liberal government has failed to do anything about this for far too long.
The Government of Quebec has led the way, and we hope that the other provinces and territories will follow its lead. However, with all due respect for our National Assembly colleagues, I have to say that it is not enough. The federal government has economic levers that it must use to level the playing field for businesses so that Canadians can benefit from the revenue generated under the law. That is what is lacking right now. However, it is not only the web giants, such as Netflix, Google, and Facebook, that must be required to charge sales tax. All the other digital platforms on which people can purchase goods must be, as well. The government is currently relying on the good faith of some stakeholders who have chosen to proactively charge sales tax.
Second, an agreement needs to be made regarding the future of our culture, specifically with regard to Netflix. I am not as familiar with this topic as my colleague from Longueuil—Saint-Hubert, who I am sure would have a lot to say about music platforms like Spotify and Apple Music. For now, I want focus on Netflix because I do not have much time.
I will not discuss the sales tax for now. I have no doubt the former heritage minister had a rough time in Quebec. Pretty much everyone unanimously agreed that her Netflix deal fell short, not only because of the percentage of francophone and Quebec content, which is nil, but also because the government asked so little of Netflix. The government is counting on the company to operate on the honour system and obey the law proactively.
Madam Speaker, I see your signal that I have just two minutes left. What better proof that it is impossible to study an omnibus bill in the time provided.
France and other countries offer examples of different ways to do this. We can also come up with our own model to acknowledge that this is the new normal without letting Internet giants rake in the profits while crushing our culture. We need to promote our cultural sector so that it can continue to make all of its unique offerings available to us with content that is our very own. This is about quality content and our duty to remember and share.
I will now move on to something else that is missing from the Liberals' budget.
The Minister of National Revenue keeps talking about a $1-billion investment. The only thing that investment did was rub salt in the wound by uncovering the billions of dollars that are lost to tax evasion and tax avoidance. We see that cronyism is alive and well in the Liberal Party. The issue of the Panama papers and the paradise papers has not been resolved. Nothing has been done to recover those billions of dollars. Again, it is a matter of fairness.
In closing, I would say that the omnibus bill does very little to address the problems that the supposedly progressive Liberals promised to fix and this is their third attempt at it. That is three attempts and three failures.
View Matthew Dubé Profile
View Matthew Dubé Profile
2018-09-28 12:09 [p.21990]
Mr. Speaker, I thank my almost neighbour from Longueuil—Saint-Hubert for his warm welcome.
Today, we are debating Bill C-82, which does not exactly have the most exciting title in the world but does address an extremely important issue. I am referring to the Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting. There may be complicated bills that come before the House, but it is rare to have one with a title that takes up a significant amount of the time we have to debate it.
All joking aside, tax avoidance and tax evasion are key issues. The urgency of dealing with these issues is becoming increasingly evident, not just to us as legislators, but also to Canadians. This may seem like a subject that is not necessarily of interest to the average person. When we go door to door in our ridings, when we have an opportunity to speak with constituents at various events held in our ridings, the income tax act and the tax agreements signed with other countries may seem like issues that are not top of mind. Our constituents are focused on daily life, sending their children to school, looking after their health and managing their own budgets.
The thing that stands out to people is the fundamental inequity of this situation. People pay their taxes and the Canada Revenue Agency chooses to relentlessly go after single mothers who may have simply misunderstood a form or whose situation may have changed—maybe they separated from their child's father for example. I personally know individuals who have gone through shameful situations. I am not sure if my colleagues have had the chance to read the letters that the CRA sends those people. Even as members of the Standing Committee on Finance, I wonder if we would be able to understand the pages and pages of text and wording that is so complicated it has no meaning. We should not have to hire an accountant or, in some cases, a lawyer, because of the actions of an agency that is supposed to be a sound manager of taxpayers' money.
This situation is bad enough, but it is even worse when we consider that CEOs, the wealthiest individuals and unfortunately quite often friends of those in power, benefit from all these exemptions, all these poorly drafted laws, all these agreements that do not go far enough. Unlike the single mother, to continue with that example, they are able to take vacations in Barbados. Then they leave their money there while they are at it. It is unacceptable.
As a society, we cannot accept that. Our collective wealth, the social contract in which we are engaged as citizens of a society by paying taxes, and the work we call on the government to do on our behalf with our money, is one of the most fundamental aspects of our society. When we consider that some people do not want to fulfill this contract, do not want to meet this commitment, then we realize that we have failed somehow. Somewhere the government has failed in one of its basic duties.
These policies, these failures, are opening up a deep, dark gap of inequality between the rich and the not-so-rich. It is odd, because the Prime Minister loves talking about the middle class and those working hard to join it. In reality, when I am in my riding, I do not see a middle class and people working hard to join it. What I see is that certain citizens are honest and hard-working, and others do not need to lift a finger because they know full well that they will always enjoy the favour of the people in power. That is what is deplorable.
In my riding, there are some people who are relatively well off. They are the kind of people the Prime Minister loves to go after and brand as cheats. They are business owners running small and medium-sized companies, and to some people, they may appear to belong to a more privileged class. They have earned a good living and worked very hard on their businesses, but they are not the ones who should be targeted.
There are also people in my riding who struggle to put food on the table and can barely scrape together their rent or mortgage payments. In terms of means and lifestyle, these people could not be further apart. However, they have one thing in common, and it is what motivates me as an MP. They are all honest, and they all believe this:
“A rising tide raises all ships.”
The idea is that we live in a society where the wealth we share should benefit us all. They agree on that. The issue is the wealthiest 1%, which sometimes means literally 1% of the population but sometimes means Liberal Party donors who are friends with the Minister of Finance. They are the ones benefiting from a system that is totally broken.
Let us dig into the substance of the bill. Kudos to the member for Sherbrooke, who has been doing excellent work as our national revenue critic. He is doing amazing work on this extremely complex issue. Some people find this hard to believe, but he is Canada's youngest ever federal MP. His hard work got him re-elected, and he is so up on his issues that he can handle this extremely complicated file.
I also want to give a shout-out to the member for New Westminster—Burnaby, who is doing great work as the NDP's finance critic. That is our job, after all.
We moved a motion in the House in this regard and so did our colleague from Joliette. We are calling on the government to do more and to solve the various problems and failures related the system that I just talked about a few moments ago in my speech.
The bill before us seeks to implement multilateral instruments and to address the fact that some of our agreements with other countries are expiring. These instruments are an important step that will enable to make changes to our multilateral and bilateral agreements more easily.
People need to understand that agreements, accords and conventions that Canada has signed with other countries often exacerbate the problem. We are being told that all of these agreements are being signed to prevent double taxation. For example, a business or individual would have to pay taxes in Canada or another country. However, the legislation and other aspects of the legal framework need to be updated because they facilitate tax evasion and tax avoidance, even though ideally they should not.
We will support the bill because we think it contains good measures that are a step in the right direction. However, let us be clear. Our support for this bill at second reading is not a blank cheque. We are far from supporting the Liberal government's approach, which has failed to date. The fact that we are supporting this bill also does not excuse the fact that the government has not taken action on any of the other issues related to tax evasion and tax avoidance that are of concern to us.
Let us look at subsection 95(1) of the Income Tax Act and section 5907 of the Income Tax Regulations. Dividends from a foreign subsidiary are exempt from taxes in Canada. That means that there are companies that are making a lot of money and they are even doing business with Quebec and Canadian consumers. They are making their money here but inflating their profits because they are exempt from paying taxes in Canada.
Closing loopholes is just a matter of common sense. We are not talking here about companies that do 95% of their business in other countries and 5% in Canada. We are talking about companies that do the opposite. We are basically talking about companies that conduct most of their business in Canada or the United States but that have opened a bank account in another country where they do almost no business at all. That is a major shortcoming, and the government has still not updated the legislation, even though it would have been quite easy to do. The bill that we are debating contains elements related to tax evasion and tax avoidance, but it does nothing to address the relevant aspects of the law.
It is funny, because earlier today, I heard a Liberal member say this has been one of the government's priorities since its first day in office. The Liberals have been in power for three years now, and nothing has been done despite pressure from civil society, prominent members of society, and even some former Liberal Party candidates. So many Quebeckers have called for action on this. We and our colleagues from other parties have been proud to speak on their behalf. Échec aux paradis fiscaux and the non-partisan Réseau pour la justice fiscale Québec are just two great examples of groups that are standing up and speaking out.
Just as an aside, not to be mean, but that is what happens when the 41 Liberal members from Quebec remain silent. When so many groups and individuals in Quebec are speaking up, those MPs come off as being not only silent, but also deaf because they are not getting their constituents' message.
I find it deeply troubling that no party that has ever been in power is blameless in this matter. I have only to come back to the example I mentioned earlier in my question to a Conservative MP. In the last Parliament, during debate on the bill on the free trade agreement with Panama, which was negotiated and signed by the Conservatives, I raised an extremely important point demonstrating that the issue of tax evasion and tax avoidance is nothing new. For years we have been talking about it, and for years the federal government has failed to take the necessary steps that Canadians expect.
To come back to the agreement with Panama, that country is known to be complicit in tax evasion and tax avoidance. The United States can hardly be called progressive, especially in light of recent events, but even they realized that when making free trade deals and opening up their markets to countries like Panama, it was vital to include a formal requirement demanding the return of any government or taxpayer money that had been stashed away by individuals who refuse to meet their obligations to our society. Through that agreement and other measures, the United States managed to recover some of the money, although there is still a lot of work to be done.
However, what has Canada done about this? We only raised the issue without even discussing the problems associated with environmental protection or labour conditions in Panama. We ignored these crucial issues. Even if we focus on just this one element, the government did nothing when we raised the issue.
This is very worrisome because the government keeps telling us that its negotiations will be based on progressive values and that it will discuss reconciliation with indigenous peoples, gender equality and environmental protection. Naturally, I agree with that. After all, the NDP are proud to raise these issues every day in the House of Commons.
However, when we have a progressive agenda, we must also promote fairness. We must take action to eliminate the gap between the friends of those in power, the people who can afford to vacation in Barbados and take their wallets with them, and the honest people working hard in our communities, the rich and the not so rich, business people, single mothers and everyone else who is harassed by the Canada Revenue Agency. That has to stop. I am repeating myself, but I have to.
I can only hope that when the government negotiates these agreements, it will recognize that we must continue on this path and demand better conduct from certain rogue international stakeholders. I may be suffering from misplaced optimism because this government has a bad track record on this.
When the Liberals came to power, they boasted that Canada is back, but what is Canada doing? It is allowing Netflix, Facebook, Google, and American multinational corporations to get away with not paying their fair share of taxes. Then it allows Liberal Party billionaire donors and friends of the Minister of Finance to do the same thing and shirk their obligations to our country. Then it allows environmental delinquents to evade their obligations. We do not even respect our own obligations. In addition, Canada keeps exporting arms to countries like Saudi Arabia. On that, we might say that the Liberals are trying to redeem themselves, according to media reports.
All of this is relevant to the debate on Bill C-82 because the bill talks about a multilateral instrument. If Canada really is back, then it should be showing some leadership in helping countries that want to combat tax evasion, tax avoidance and all the other problems I just listed. Instead, Canada is sheltering delinquent players and prolonging a situation that has existed for far too long.
I would like to explain why all of this is so important in a way that the people at home can understand. I do not mean to be condescending—far from it. When I myself get letters from the Canada Revenue Agency, my first reaction is often to wonder what it is all about. When people get these letters, they sometimes ask their friends if they are going to jail, because they cannot understand them. That is how single mothers, sick people and people with disabilities are treated when they try to claim benefits they are entitled to.
The member for Sarnia—Lambton said that this is criminal. She herself rose in the House of Commons to talk about diabetic people being targeted by the Canada Revenue Agency, which is totally unacceptable. However, the Minister of National Revenue keeps bringing up this $1-billion figure. She keeps talking about money, but unless the law and agreements are changed, we are just throwing money out the window. That is a very apt phrase in this case, because, after all, that is what the rich in our society are doing, and it is all the more laughable because this money is landing well outside the federal government's coffers. That is unacceptable.
I would now like to say a few words to all of my constituents. It is all well and good to debate the fiscal code of conduct and the Income Tax Act, but it is important to recognize that the government has consistently failed when it comes to closing the gap between the rich and the poor. To accomplish that, the government must start with simple, practical measures.
By supporting Bill C-82 at second reading today, I am once again imploring the government to take action to put an end to tax evasion and tax avoidance, which it could have done by supporting the NDP's motion. The government needs to put an end to this injustice, which weighs heavily on the minds of honest Canadians who are trying to live their lives and benefit from a community and from an important social contract under which everyone must contribute their fair share.
View François-Philippe Champagne Profile
Lib. (QC)
Madam Speaker, I believe that this will be one of the last speeches, if not the last, of this session that is coming to a close.
We have taken a historic step with Bill C-29. I know that one day, when current members are all retired and, like many Canadians, will be able to enjoy the enhanced pension plan, we will remember this historic day when we took a step forward for Canadian society by advancing the rights of seniors, young people, and the middle class. It is a great day for Canada.
I would like to talk about Bill S-4, which concerns another very important issue.
I welcome the opportunity today to speak to Bill S-4, the tax convention and arrangement implementation act, 2016. I know a number of members of the House have spoken already to this important bill. This is in the best interests of Canada. It is about ensuring we grow our economy and tax fairness.
People understand the objective, and I think all members in the House will support the bill. It is the right thing to do for Canada. It is also the smart thing to do for Canadians. Canadians gave us a mandate to grow the economy and ensure we engage with our trading partners, whether it is the state of Israel, Taiwan, or Hong Kong, and work with them to grow our economy. This is what I will talk about today.
I seek the support of all members. They know we need to send our notice before the end of the year in order for these agreements to come into force in 2018. This is very important for Canada and our trade relationships with Taiwan, the state of Israel, and Hong Kong.
As Canada's economy is increasingly intertwined with that of the global economy, the importance of eliminating tax impediments to international trade and investment has grown in importance. I think every member in the House understands that. Whether one sits as a Conservative, NDP, Liberal, or Bloc Québécois, one must understand that it is in our best interest to invest and ensure we have more trade and trade that is fair.
One way to remove these impediments is through tax treaties or double taxation agreements. These treaties are used internationally to eliminate tax barriers to trade and investment.
Canada's network of 92 income tax treaties currently enforces one of the most extensive in the world, and that is something we should be proud of as Canadians. We are a fair trading nation. However, as with any measure of efficiency, there is an ongoing need to update and modernize this network with foreign jurisdictions.
By modernizing our tax treaties and expanding our network, we will help facilitate international trade and make it easier for our treaty partners to invest in Canada. That is the mandate we have been given. The people who sent us to the House expect us to grow the economy, create jobs for Canadians all across our nation, in every riding in our country. They want us to work for them. I hope my colleagues from the NDP, the Bloc, and the Conservatives will support this, because I am sure they too believe in creating jobs for Canadians.
This will help our economy and businesses, and strengthen the middle class. I still believe that everyone in the House should be working with us to help the middle class. There is nothing more important in our country that we can do than to support the middle class, families, youth, and seniors.
On the international scene, the Canadian economy always faces headwinds. However, Canada can count on some solid economic fundamentals in order to seize the opportunities presented by the global economy.
As there are only a few seconds left before we adjourn, I just want to wish every member a merry Christmas. I thank members for working with us to make sure that we do what matters to Canadians.
Let us always remember when we rise in the House and raise our voice to bring something forward that we do it on behalf of the good people who have sent us here to make a difference in their lives, not just for the current state of affairs, but for the future. Canadians expect the best.
To will quote our Prime Minister “better is always possible”, so let us work together in 2017 to make sure we strive to always be at our best, not for ourselves, but for the people we serve who have sent us to Ottawa. These people expect the best out of us, and that is what we will deliver.
View Francesco Sorbara Profile
Lib. (ON)
View Francesco Sorbara Profile
2016-12-08 15:48 [p.7859]
Madam Speaker, I am pleased to rise today to speak on Bill S-4.
At first glance, members might ask why a bill dealing with international tax treaties and measures would be of much importance. On the face of it, Bill S-4 does not appear to have much to do with economic growth, but if we look at it a little, the thrust of the bill is entirely consistent with our government's commitment to growing the middle class and to help those looking to join it.
Canada is a trading nation and improving economic growth in our country is highly dependent on international trade and investment. Removing barriers to incoming business and capital is essential to these efforts. Let me reiterate, our government has been relentless in its efforts to produce economic activity and has made historic investments in infrastructure.
In addition to the investments made in budget 2016, the Minister of Finance recently announced the creation of an infrastructure bank, which will help to leverage federal government commitments even further.
Our government recognizes that to further grow the economy, we need to attract investment and talent to our country. International tax competitiveness is a key element of Canada's economic performance that we must not overlook. A tax agreement with other jurisdictions, including Taiwan and Israel, is an important part of attracting new investments and talented individuals, boosting economic growth, and creating jobs.
While large-scale tax measures generally get more attention in terms of their efforts on Canada's international competitiveness, there are many other components that can be easily integrated into the tax system and strengthen Canada's tax advantage.
Tax treaties with other countries and jurisdictions play an important part in the goal of making Canada's tax system as efficient as possible, and thus more competitive. Canada currently enjoys the benefits of a network of bilateral double taxation conventions currently enforced with 92 foreign jurisdictions, one of the largest such networks in the world.
I will be splitting my time with the hon. member for Laurentides—Labelle.
There is an ongoing to need to expand and modernize this network, and we are continually working to secure additional agreements and update existing ones. These treaties of mutual benefit to both signatories and to their respective taxpayers provide clarity on the rules relating to cross-border trade and investment, and remove barriers to augmenting them.
Furthermore, these agreements help to combat tax avoidance and evasion through the exchange of information that permits our government to uncover income that may be concealed elsewhere. It is very important, and our government has spent a lot of time and energy on this, ensuring that Canadians have a tax system that they can have confidence in and that all Canadians and Canadian corporations are paying their fair share.
To these ends, Bill S-4 implements a double taxation convention and a double taxation arrangement recently concluded and publicly announced with the State of Israel and with respect to the jurisdiction of Taiwan. Bill S-4 also adds an interpretation provision to the legislation that implemented the Canada-Hong Kong double taxation agreement, for greater certainty.
Relief from double taxation is desirable because of the harmful effects double taxation can have on the expansion of trade and the movement of capital and labour between countries. Double taxation conventions require countries to clarify the respective jurisdiction to tax income and provide certain forms of relief from double taxation. There is currently no double taxation arrangement between Canada and Taiwan, Canada's fifth-largest Asia-Pacific trading partner and 12th overall in 2013. This means that Taiwan is one of the few remaining of Canada's larger, and I would say one of the most important, trading partners to enter into our tax treaty network.
The bill also implements a revised double taxation convention with the State of Israel. This replaces an existing tax treaty that was signed here in Ottawa in 1975. The revised double taxation convention has been updated to make it consistent with Canada's current tax treaty policy.
This revised double taxation convention with the State of Israel builds upon strong, multi-dimensional, bilateral relations, as evidenced by our close political, economic, social, and cultural ties.
Underlying the strength of the Canada-Israel bilateral relationship is a breadth of personal connections between the two countries. There are approximately 20,000 Canadian citizens living in Israel and many Canadians, of course, have family in Israel. The Canadian Jewish community, which stands at around 350,000, acts as an important bridge between Canada and Israel. These informal ties have led to significant co-operation in business, philanthropy, and tourism.
Canada and Israel have a number of bilateral agreements in place, including the air transportation agreement from 2015; a renewed and funded science and technology agreement; the Canadian Space Agency and Israeli Space Agency memorandum of understanding for space co-operation, dated 2005; and the 1975 convention.
On the trade side, Canada-Israel merchandise trade totalled approximately $1.4 billion in 2015, comprising $342 million in Canadian exports to, and $1.2 billion imports, from Israel. Israel was Canada's forty-fourth-largest export destination worldwide in 2013. In that year, it was Canada's forty-third-largest source of imports globally.
Even though Israel's trade numbers with Canadian may not be in the top 10 or top 20, I would still certainly say, after having the honour of visiting the State of Israel this past summer, that expanding trade and investment ties between Canada and the State of Israel is very important.
What Israel has done with venture capital funding, specifically in Tel Aviv, is very impressive. Its venture capitalists are world-renowned. There are a lot of exciting things happening in the State of Israel that Canada needs to look at and emulate.
With respect to Bill S-4, the intention of this convention signed with the State of Israel on September 21 is to contribute to the elimination of tax barriers to trade and investment between Canada and Israel and to help solidify the economic links between the two countries. It is consistent with the government's commitment to seek new investment and trade opportunities for Canadians and to promote foreign investment in Canada.
As with the double taxation arrangement with Taiwan, the convention with the State of Israel generally follows the pattern of other double taxation conventions already concluded by Canada. Accordingly, it generally follows the format and language of the OECD model tax convention on income and on capital.
Most countries, including Canada and Israel, tax their residents on their global income. Additionally, when a resident of a country derives income from sources in another country, such as from a business located there, it is typical for the source country to subject that income to tax.
The convention recognizes this international taxation dynamic and sets out in which circumstances and to what extent Canada and Israel may tax the earnings of one another's residents and non-residents.
The convention also implements the current internationally agreed standard for the exchange of tax information upon request, as developed by the OECD and, therefore, allows Canadian tax authorities to obtain information relevant to the administration and enforcement of Canadian tax laws, and assists them in the prevention of international tax evasion and avoidance.
Bill S-4 would also reduce double taxation and encourage investment by reducing the withholding tax. It would provide for a maximum withholding tax rate of 15%, in the case of the State of Israel and the jurisdiction of Taiwan, on portfolio dividends paid to non-residents. This would help encourage and foster innovation and trade between Israel and Canada, and Taiwan and Canada.
For dividends paid by subsidiaries to their parent companies, the maximum withholding tax rate is reduced to 5% in the case of the State of Israel, and 10% in the case of the jurisdiction of Taiwan.
Again, these measures would encourage and facilitate trade and investment and increase ties between Canada and Israel, and Canada and Taiwan.
The bill would also cap the maximum withholding tax rate on interest and royalties at 10% and on periodic pension payments at 15%.
The provisions of the convention and arrangement contained in the bill are an excellent example of our government's efforts to create a more equitable and competitive tax system.
Bill S-4 would allow us to continue to grow our economy and create good middle-class jobs. It would allow for more predictable and fairer tax treatment of cross-border transactions and help the government to combat tax avoidance. We look forward to securing additional agreements such as these, and I encourage all members to support this legislation to help Canada become a more competitive jurisdiction for international business and investment.
View David de Burgh Graham Profile
Lib. (QC)
Madam Speaker, I thank my colleague from Vaughan—Woodbridge for sharing his time with me.
I am pleased to rise in the House to address the important matter of Bill S-4. As members will know, this bill implements a convention and an arrangement on double taxation that were recently signed and announced. The convention was concluded with the State of Israel, and the arrangement with Taiwan.
Canada now has 92 tax treaties in force, and it continues to work on developing other such treaties with other jurisdictions. Bill S-4 builds on Canada's ongoing efforts to update and modernize its network of tax treaties, which helps prevent double taxation and tax evasion.
Indeed, Canada currently has one of the world’s largest networks of tax treaties. This is an important feature of Canada’s international tax system, a feature that is key to promoting our ability to compete. At the same time, the system needs to ensure that everyone pays their fair share of taxes. We do not want certain foreign and domestic firms to be able to take advantage of Canadian tax rules to evade taxes, or for certain wealthy individuals to turn to foreign countries to hide their income and avoid paying taxes.
Every time that happens, workers and small businesses in Canada end up having to pay more taxes than they should have to. It is not right. The Canada Revenue Agency needs information from foreign countries in order to identify and discourage the hiding of income.
To that end, the convention and the arrangement on double taxation in Bill S-4 implement the current international standard on tax information exchange on request established by the Organisation for Economic Co-operation and Development, thus enabling Canadian tax authorities to obtain the necessary information for the administration and enforcement of Canadian tax laws, while helping them prevent international tax evasion.
Here at home, the Government of Canada continues to work to keep our tax system up to date and competitive, so that Canada can remain a leading player in the global economy. It is essential to take measures in support of a more competitive tax system in order to foster conditions that allow Canada's entrepreneurs and industries to excel, thus clearing their path to success.
Clearly, having modern tax conventions, such as those contained in Bill S-4, is a key component of that goal. Canada remains committed to maintaining a tax system that will continue to help Canadian businesses in their drive to be world leaders, while ensuring that everyone pays their fair share of taxes.
The tax conventions complement our government's broader commitment to implementing a more competitive tax system that will raise the standard of living of all Canadians. The convention and arrangement for the avoidance of double taxation set out in Bill S-4 directly support and encourage cross-border trade in goods and services, which in turn helps Canada's domestic economic performance.
Moreover, every year, Canada's economic wealth depends on foreign direct investment, as well as the entry of information, capital, and technology. In short, the convention and arrangement for the avoidance of double taxation set out in Bill S-4 provide individuals and businesses in Canada and the other countries involved with predictable and equitable tax results in their cross-border dealings.
I would now like to talk about two things that this bill proposes to do, namely reduce withholding taxes and prevent double taxation. Withholding taxes are a common feature of the international taxation system. They are levied by a country on certain items of income earned in that country and paid to the residents of the other country. The types of income normally subjected to withholding taxes would include, for example, interest, dividends, and royalties.
Without tax treaties, Canada usually taxes this income at the rate of 25%, which is a set rate under our own legislation for income tax, more specifically, the Income Tax Act. Withholding tax rates in other countries are often as high or even higher.
Since one of the main functions of a tax convention is to divide the powers of taxation among the signatory partners, the conventions contain provisions that reduce and, in some cases, eliminate withholding taxes that could be applied by the jurisdiction where certain payments originate.
For example, the convention and the arrangement for the avoidance of double taxation in Bill S-4 provides for a maximum withholding tax rate of 15% on portfolio dividends paid to non-residents in the case of the State of Israel and Taiwan. The maximum withholding tax rate for dividends paid by subsidiaries to their parent companies is reduced to a rate of 5% for the State of Israel and 10% for Taiwan.
Withholding rate reductions also apply to royalty, interest, and pension payments. The convention and the arrangement for the avoidance of double taxation covered by this bill caps the maximum withholding tax rate on interest and royalty payments to 10%, and the maximum withholding tax rate for periodic pension payments to 15%.
The other issue I want to talk about is double taxation. Double taxation at the international level happens when taxes are collected on the same taxable income for the same period in at least two jurisdictions. The convention and arrangement regarding double taxation in Bill S-4 will help prevent double taxation so that any given income is taxed only once.
Generally speaking, the Canadian tax system applies to the income earned by Canadian residents anywhere in the world. However, foreign authorities can also invoke their right to tax any income earned in their jurisdiction by Canadian residents. Canada usually gives a credit for foreign tax paid on that income. This duplication of taxes paid in the jurisdiction where the income was earned and in the taxpayer's country of residence can have unfair negative consequences for taxpayers. No one should have to pay taxes twice on the same income.
Without any convention or arrangement for the avoidance of double taxation such as the ones provided for in Bill S-4, that is exactly what happens. Both countries could claim taxes on the income without providing the taxpayer with any measures of relief for the tax paid in the other country.
In closing, the convention and arrangement for the avoidance of double taxation proposed in the bill will provide certainty and stability and create a favourable climate for trade, to the benefit of taxpayers and businesses in Canada and in the partner countries.
What is more, the convention and arrangement for the avoidance of double taxation proposed in the bill will strengthen Canada's position in an increasingly competitive global trade and investment environment.
Those are the reasons why I ask my colleagues to vote in favour of the bill.
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