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 Minister of Finance 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 Minister of Finance 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—