44th Parl. 1st Sess.
October 6, 2022 10:00AM
- Oct/6/22 11:57:07 a.m.
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Madam Speaker, the motion calls for:
(a) forcing CEOs and big corporations to pay what they owe, by closing the loopholes that have allowed them to avoid $30 billion in taxes in 2021 alone, resulting in a corporate tax rate that is effectively lower now than when this government was elected;
The motion talks about tax avoidance by all corporations in every sector to the tune of $30 billion. In fact, that corresponds to the difference between the corporate tax rate, which is 25%, and the rate corporations actually pay, which is around 15%. We have to be very careful when we make such statements since the gap between the tax rate and the effective tax rate is not necessarily due to abuse.
Parliament often adopts measures to provide tax breaks and tax credits to encourage good behaviour. Just look at the research and development tax credit and the production technology tax credits, which increase productivity and help limit the effects of the labour shortage. Look at the tax credit for clean technologies and the deductibility of contributions to pension plans and workers' group insurance plans.
All those credits lower the effective tax rate, but they are neither abuse nor fraud. It is false and inflammatory to suggest that inflation is due in large part to greedy corporations not paying their fair share of taxes.
Madam Speaker, I would ask the Liberals to respect decorum. I know they do not listen when members are speaking in French in the House, but they could at least keep quiet so as not to interfere with the business of the House.
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- Oct/6/22 11:59:27 a.m.
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Madam Speaker, we need a tax system that is fair and equitable. The system should be progressive, with the wealthy contributing more to support public services. Obviously, that should apply to corporate profits too.
To achieve a fair and equitable tax system, I urge parliamentarians to do much more to fight tax evasion and tax avoidance. Tax havens are becoming increasingly popular because of lax legislation. Companies open subsidiaries that are nothing but empty shells. They do not do anything. They exist solely for the purpose of tax evasion. By recording revenue in empty shells, profitable corporations declare next to no profits in countries with normal tax rules. That is how they avoid paying tax. These despicable schemes carried out with the help of unscrupulous experts are usually perfectly legal. That is what we call tax avoidance. We need to change the laws and regulations as soon as possible.
Wealthy individuals usually opt to shelter their fortunes and their income in tax havens where information is less transparent so they can cheat the tax system. That kind of fraud is tax evasion. It is also important to note that organized crime and terrorist groups use tax havens.
According to the World Bank, in 2016, tax havens held more than $36 trillion U.S. Yes, I said $36 trillion U.S. The situation is probably even worse today.
According to economist Gabriel Zucman, in 2017, no less than 40% of international financial transactions involved tax havens in some way.
The International Monetary Fund estimates that the use of tax havens costs governments $600 billion a year in lost corporate income tax revenue and $200 billion in lost individual income tax revenue, for a total of $800 billion.
As expert Alain Deneault notes, everyone else has to make up this shortfall, either by paying higher taxes or by enduring austerity policies.
Considering their impact on government finances and operations, tax havens are a major political issue. The public wants them to disappear, but those profiting from them want them to stay. As the IMF concluded, “the wealthier the individual and the larger the multinational corporation...the more deeply they are embedded in the offshore system and the more vigorously they defend it”. That has to change.
Statistics Canada reports that Canadian corporations invested $381 billion in the top 12 tax havens in 2019. That is nearly one-third of all Canadian foreign investment.
In a 2019 report, the Parliamentary Budget Officer found that “financial flows between Canada and certain jurisdictions are disproportionately large compared to their GDP”. This proves that those amounts are not genuine investments, but rather accounting manoeuvres aimed at evading taxes.
Also in 2019, the CRA estimated that the use of tax havens by Canadian companies could be costing the treasury up to $11.4 billion in lost revenue, more than three-quarters of which would be from large corporations. That is four times more than the CRA had estimated that it was losing to individuals' use of tax havens in a report published the previous year. That amount is undoubtedly vastly underestimated.
In fact, the CRA was only considering schemes that were fraudulent or dubious, not those that were perfectly legal, as “its report does not estimate the gap resulting from ‘legal’ tax avoidance through profit shifting”, which is much greater.
The federal government is complacent with respect to the fraud and abuse that takes place with the use of tax havens. Parliament allocates ever higher amounts to help the agency tackle the problem, but nothing happens and we are not seeing results. Not only is the government complacent in going after fraudsters but it has essentially legalized the use of tax havens.
Unlike the NDP motion, which only condemns the greed of bad companies and accuses them of causing inflation, the Bloc Québécois's more constructive approach specifically targets the problem of tax avoidance with the use of foreign tax havens. We are proposing six possible solutions.
First, amend the Income Tax Act and the Income Tax Regulations to ensure that income that Canadian corporations repatriate from their subsidiaries in tax havens ceases to be exempt from tax in Canada.
Second, review the concept of permanent establishment so that income reported by shell companies created abroad by Canadian taxpayers for tax purposes is taxed in Canada.
Third, require banks and other federally regulated financial institutions to disclose, in their annual reports, a list of their foreign subsidiaries and the amount of tax they would have been subject to had their income been reported in Canada.
Fourth, review the tax regime applicable to digital multinationals, whose operations do not depend on having a physical presence, to tax them based on where they conduct business rather than where they reside. Progress is being made in that regard.
Fifth, work toward establishing a global registry of actual beneficiaries of shell companies to more effectively combat tax evasion.
Sixth, and finally, use the global financial crisis caused by the pandemic to launch, or relaunch, a strong offensive at the Organisation for Economic Co-operation and Development against tax havens with the aim of eradicating them for good.
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- Oct/6/22 12:06:49 p.m.
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Madam Speaker, I completely agree with my colleague that this has to change. We just need the government to show some political will. The problem is that the power keeps bouncing back and forth between two parties that have no interest in doing anything about it, so it remains legal.
The kind of scheme my colleague described would simply be illegal in many other countries, and possibly even punishable by imprisonment. Here, companies ask for advice and are told that everything is just fine. If there is a problem, they are told to simply pay the tax they should have paid, without any further consequences. Meanwhile, people would go to jail in many other countries.
This has to change, but the government needs to show the political will to change it.
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- Oct/6/22 12:08:33 p.m.
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Madam Speaker, I would like to thank my colleague for his speech.
When it comes to the work of the Standing Committee on Agriculture and Agri-Food, we should draw inspiration from what the British Parliament is doing. We know that the food distribution sector is an oligopoly. Do its members engage in reprehensible practices? Did they take advantage of their position and increase profits off the backs of the thousands of farmers who compete with each other or the millions of consumers who buy their products? Was there collusion that would explain these excessive profits?
The Competition Bureau should look into this. The British Parliament has given that mandate to its competition bureau. As stated in this motion, the Competition Bureau should be given the mandate to study whether there is collusion that resulted in excessive profits, and then we can intervene. It is our duty to give this mandate to the Competition Bureau.
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- Oct/6/22 12:10:07 p.m.
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Madam Speaker, I thank my colleague and friend from Beauport—Limoilou for her question and for the excellent and tireless work she does in the House.
The Competition Bureau is not doing enough at the moment. Obviously, it is up to the government and the House to tell it to do more, to take on more cases, conduct more studies and intervene more.
Competition is very important. I will remind members of the time Rona was sold to the American company Lowe's. The Competition Bureau had the power to do something about that but chose not to, and, in my view, that deal was bad for the Quebec economy.
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- Oct/6/22 4:14:01 p.m.
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Madam Speaker, I thank my colleague for his speech.
With regard to possible collusion in the food distribution industry, we know that the industry is an oligopoly of five giants that control 90% of the market. These giants can easily agree amongst themselves to negotiate for low prices with agricultural producers or set high prices when selling to consumers. The motion alludes to this indirectly.
I believe my favourite part of the motion is the one about asking the Competition Bureau to launch an investigation of the industry, of these giants, to check for collusion and excessive profits, a bit like what was done in England with the British Parliament.
What does my colleague think of that?
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