44th Parl. 1st Sess.
June 16, 2023 10:00AM
- Jun/16/23 10:32:11 a.m.
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The hon. member for West Vancouver—Sunshine Coast—Sea to Sky Country.
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- Jun/16/23 10:32:14 a.m.
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Madam Speaker, I want to wish my hon. colleague from Courtenay-Alberni well. I know there have been some serious issues with forest fires impacting transportation throughout his riding. I wish him the best, and it is good to see him here.
I very much agree with the premise of his question. The fact that we do not know how the quota is allocated is something of significant concern. I certainly support looking into what it might look like to have that quota allocated to the fishermen themselves, not to companies that are perhaps reselling that quota.
Now that we have created this beneficial ownership registry, it would be interesting to see how that might be able to be expanded to the owners of the quota as well, so we can better understand—
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Madam Speaker, as previously stated, the Bloc Québécois supports Bill C-42. This bill will reveal who is really behind shell corporations. The bill will make it easier to fight tax evasion, money laundering and the financing of illegal activities.
Furthermore, the process that resulted in this legislation is beyond reproach and respects the jurisdictions and autonomy of Quebec and the provinces. This approach is becoming increasingly rare in Ottawa, and we applaud it in this case. Finally, I would like to remind the House that Quebec already has its own registry.
However, for anyone who believes in tax fairness, surely it is high time we cracked down on tax havens. As members know, by using them, the ultra-wealthy are evading taxes like never before, and so are the big banks, multinationals and web giants. These companies justify their actions on the grounds that their schemes are legal, even though their greed is completely immoral.
I would now like to refer to two economists, Emmanuel Saez and Gabriel Zucman, who clearly illustrate the method in their book The Triumph of Injustice.
First, they explain that the legal framework for multinationals has changed little since they were first developed in the 1920s. Subsidiaries of the same multinational are treated as autonomous entities. For example, “Apple Ireland must be considered for tax purposes as a firm of its own, distinct from Apple USA.” Since Ireland's tax rate is half that of the United States, it is in the multinational's interest to transfer its profits there to pay half the tax.
In theory, subsidiaries must exchange goods and services at market value, on an arm's-length basis, as if the entities were independent of each other. In practice, however, they have considerable leeway to shift profits to tax havens.
The principle, which has barely changed, was developed in the 1990s by tax optimization consultancies. It involves the sale between subsidiaries of assets that have no market price, such as logos, brands, management services or financial services.
The economists give some examples:
What's the price of Apple's logo? It's impossible to know: This logo has never been sold in any market. What's the price of Nike's iconic “swoosh”? What's the price of Google's search and advertisement technology? Since these logos and trademarks and patents are never traded externally, firms can pick whatever price suits them.
The firms sell all-in services, that is, a creative intragroup transaction accompanied by a certified “correct” transfer price. Saez and Zucman explain what this means:
Thanks to the proliferation of intragroup transactions conducted at doctored prices, high profits [in the hundreds of billions of dollars] end up being recorded in subsidiaries where tax rates are low, and low profits in places where they are high.
The economists estimate that $800 billion U.S. in multinationals' profits is transferred to tax havens. That represents 40% of their global profits and 60% of the profits of U.S. multinationals.
Variations on these schemes are made available throughout the world by the Big Four accounting firms, Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers.
It is always the same thing. Here are two examples provided by the authors:
In 2003, a year before it was listed as a public company in August 2004, Google sold its search and advertising technology to its own “Google Holdings,” a subsidiary incorporated in Ireland but for Irish tax purposes a tax resident of Bermuda, an island in the Atlantic where its “mind and management” are supposedly located.
Transfer pricing was kept secret, but it was certainly low. Otherwise, it would have had to be declared to the Securities and Exchange Commission. Saez and Zucman estimate the figure at $700 million U.S., tops, when the same algorithms have, for example, enabled Google Holdings to report $22.7 billion U.S. for doing business in Bermuda in 2017 alone. That is 30 times more for a single year. Talk about the goose that lays the golden eggs.
Economists have pointed out that, in Asia, Singapore is the location used instead of Bermuda. Its tax rate for multinationals is also nil, or zero.
Here is the second example. In 2004, Skype, which was founded by a Swede and a Dane, transferred the better part of its technology to its Irish subsidiary. However, thanks to LuxLeaks, the leak of confidential documents from PricewaterhouseCoopers in 2014, we know the details of that transaction. The cost of the technology transfer was estimated at 25,000 euros, which is scandalous, given that Skype was bought by eBay a year later in 2005 for $2.6 billion U.S., over 100,000 times the price of the transfer. Saez and Zucman explain that corporate tax dodging schemes are quite simple. They said the following:
At its core, it involves manipulating the price of intragroup transactions in goods (like iMacs), services (as when a US firm buys “management advice” from an affiliated party in Switzerland), assets (such as Google selling its search and advertisement technology to its Bermuda subsidiary), or loans (as happened during the Netherlands Antilles frenzy of the early 1980s).
In that regard, the Netherlands Antilles frenzy was a sort of dress rehearsal for the use of tax havens. It started in the late 1970s and was banned in the late 1980s. This new corporate tax evasion industry fits within the context of the emergence of the neo-liberal ideology, which occurred at the same time as the boom in tax havens for individuals. Saez and Zucman illustrated that as follows, and I quote:
Here is how it worked. A US firm would set up a subsidiary on the island of Aruba, Bonaire, or Curaçao. It would then have this affiliate borrow money from a European bank at the prevailing interest rate, around 3%, and lend it back to the US parent company at a much higher interest rate, around 8%.
The difference in rates helped shift the profits from the United States to the Caribbean.
As we know, the use of tax havens really took off in the 1990s. With the fall of the Berlin Wall, neo-liberalism triumphed. The new generation of executives focused their corporate role on serving the shareholders exclusively. In the meantime, the share of profits earned overseas doubled from 15% to 30% for American multinationals.
The response from wealthy states was to lower the corporate tax rate, which did not help repatriate their profits. Between 1985 and 2018, the average corporate tax rate was halved, going from 49% to 24%. As the two economists point out, in the early 1950s, corporations paid as much in taxes as individuals. Today, with the tax cuts and the use of tax havens, this ratio has changed dramatically. Businesses contribute 10 times less than individuals. Back home, in Quebec, this imbalance has been documented extensively by Professor Lauzon.
Multinationals now reign supreme; they artificially relocate their profits to tax havens to avoid paying taxes. The profits they do not relocate are taxed at half the rate they were 30 years ago. Not to mention that they outsource their real activities to countries where the people are underpaid, allowing their profits to swell even more.
The solution to this injustice is first and foremost political. In fact, that is the pretext that multinationals use. According to their rhetoric, all of this is legal. What is more, they undertake a colossal amount of lobbying to keep it that way. Saez and Zucman take issue with that:
It's a weak defense: nothing of substance happens in Bermuda, so it stands to reason that Google has booked $22.7 billion in revenue in that island to avoid taxes, in violation of the economic substance doctrine.
The authors conclude it will take a revolution in how things are done if we want to change the game, saying, “In need of a Copernican revolution, [the OECD has] been busy refining the Ptolemaic model”.
I therefore invite the House and this government to be the revolution the world needs.
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- Jun/16/23 10:42:33 a.m.
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Madam Speaker, my riding of Nepean has two rivers, farmland, a greenbelt and a high-tech processing and testing facility. Best of all, we have the best people in Canada, who speak 120 different languages. It is not only beautiful but it is also a mini-Canada.
These days, with the number of corporations being set up, sometimes there is no difference between tax avoidance and tax evasion. The hon. member mentioned the tax havens around the world. I want to pick his brain and get his comments on the global corporate minimum tax that is being proposed, and which would be implemented soon.
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- Jun/16/23 10:43:24 a.m.
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Madam Speaker, I would really enjoy visiting my colleague's wonderful riding.
I think that the plan to establish a global minimum tax rate is a good solution. I think people were waiting for the OECD or the G20 to endorse it before they moved ahead with implementation. In my view, the fact that the Biden administration is using its influence could help the proposal pick up steam. As far back as 2009, after the last economic crisis, the President of France at the time, Sarkozy, said that playtime was over. Since then, nothing has changed.
It will take something big for words to turn into action. Maybe this time is the right time. Even though 15% is not enough, it is a step in the right direction.
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- Jun/16/23 10:44:17 a.m.
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Madam Speaker, I thank my colleague for informing us, like a good teacher, about the tax evasion issue. I would like him to go into greater detail about one of the points he raised in his speech. I am referring to international lobbying and the large corporations that set up tax evasion schemes.
Is there any way to raise their awareness or simply enact legislation to prevent them from doing these things?
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- Jun/16/23 10:44:45 a.m.
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Madam Speaker, just looking at the registry of lobbyists reveals how many times big players like Google, big accounting firms and large multinationals meet with members of this government. It is the same elsewhere. It is astounding.
One has to wonder whether the minister spends more time with them than he does with his children and his family. That definitely needs to change. Obviously, it is going be difficult. Legislation is needed, but to make these legislative changes, the government has to serve the people, not these big multinationals.
When we think of Paul Martin, who made Barbados a legal tax haven while he was building his clubhouse there, when we think of Bill Morneau, who was the finance minister and whose company Morneau Shepell boasted of selling advice on how to use tax havens on its website, one has to wonder who this government serves.
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- Jun/16/23 10:45:44 a.m.
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Madam Speaker, we know that arrangements that allow for tax evasion are made in secret, but we also know that the consequences are not secret when governments do not have enough revenue to pay for the services Canadians rely on.
I wonder if my colleague could elaborate on the consequences of not having the tools to expose the arrangements that allow for tax evasion.
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- Jun/16/23 10:46:19 a.m.
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Madam Speaker, that is an insightful comment and question. I thank my hon. colleague, with whom I am fortunate to serve on the Standing Committee on Finance.
When a Toronto bank reports its profits in the Caribbean, this means unpaid taxes, longer hospital wait times and less school funding. These are directly linked. This is so important. We all remember the tragic fires in Fort McMurray. The IMF said that these fires were causing a recession in the Caribbean, where Canadian corporations and Canadian banks report their profits, because there was a direct impact. That gives us an idea of the situation. It is opaque, but we can indirectly see the scale of the problem. This has to change, but it takes political will. I implore the government to do something about it.
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Madam Speaker, it is my pleasure to rise today to speak to Bill C-42 at report stage. I will be talking about themes that have already been explored today.
One of the reasons a public beneficial ownership registry is so important is because Canada, notoriously, is losing tens of billions of dollars in tax revenue ever year as a result of tax havens. That is where Canadian corporations are able to declare their revenue in other jurisdictions, and then either bring that money back into the country or not, without paying any sort of tax. That means, despite corporations doing their business and raising their revenue here in Canada, they are finding ways out of paying their fair share.
That is from a more general point of view and about paying into general revenue that then goes to paying for things such as the Canada health transfer and other important sources of funding that ensure Canadians have access to health care, education and the other important services they depend upon. It is also because these companies are making use of a fair amount of Canadian infrastructure, which Canadians pay for through the public purse, to create the profits they are getting. It is only right that they pay their fair share.
If we look at the share of government revenue that comes from business and corporate tax over the last number of decades, that share has been decreasing considerably against the share that working Canadians are paying. We do end up in a difficult situation that is not financially tenable, where corporate Canada is no longer paying as much of the bill as it used to for government services.
One of the tools to do that is to better define the extent to which tax revenue is being avoided or escaped by corporate players in Canada. Part of that puzzle is lifting the veil of secrecy that so often covers various business arrangements and makes it hard to tell who needs to be held to account for their business practices.
Even though I think it is an interesting idea to have a global minimum tax, which is not to say that means Canada has to have a minimum corporate tax, we have a lot of other competitive advantages that make us an attractive place for investment, and Canada should not sell itself short in that regard.
Nevertheless, even if we did have a world minimum corporate tax, it is not going to address the issues of secrecy that a public beneficial ownership registry rightly addresses. It is also important to say that, in the current context and over the course of the last year or so, the arguments for a beneficial public ownership registry have become even more urgent because there is another side to this story.
When I talk about the veil of secrecy around corporate actors and ensuring they are paying their fair share, that is just one part of the story. We also know that there are malignant actors who are not just getting out of paying their fair share of taxes, but who are doing far more. I think of some of the Russia oligarchs who are known to be close associates of Vladimir Putin, who is currently waging an illegal and unjust war in Ukraine. Canada, unfortunately, is one of the places where they have seen fit to stash some of their cash and assets.
To be able to properly enforce sanctions against people like that, we have to lift the veil of secrecy around corporate ownership because those are the spaces where these kinds of folks are hiding. That is why we have seen so many of Canada's allies across the world, in the last 18 months or so, really accelerate their own programs for beneficial public ownership registries. This is why Canada cannot be left behind.
My understanding is that, to implement this registry, it will take some time after the legislation passes to do that. That is why I believe it is important this legislation pass before we break for the summer. That gives about six months to the end of the year for officials to, with a legislated mandate from Parliament, begin to put this registry into effect.
That is one thing we can do to support Ukraine and ensure that Canada is not a haven for those that would do Ukraine harm. It is why this has to pass with urgency.
I take some of the points that were made earlier in debate about the imperfections of the process at committee. What I am hearing is that there is some goodwill around this bill and a willingness, I hope, as we move forward, to look at some of the weaknesses of the bill and improve upon it in the future. However, I would rather see us improving upon something that is in place than continuing to talk about what might come to be in a context where the buddies of Vladimir Putin are having a relatively free run here in Canada because we do not have the information we need to adequately track those sanctions.
I will give an example. There has been talk about lowering the ownership threshold under the public beneficial ownership registry. That is an idea I am quite open to, but I am also mindful that, if this registry is going to be a success, we need to have participation from the provinces. My understanding is that, where provincial registries already exist, the threshold is around 25%, so that is a conversation the federal government needs to have to work with the provinces to bring everyone along together in order to lower that threshold. If we end up with a federal registry with a lower threshold and some provinces decide not to participate, or to delay their participation, I do not think we will be doing ourselves a service.
That is why, while there is room for legitimate criticism and an opportunity to do better as we learn more about public beneficial ownership registries, it should not delay this legislation's passing before summer, so this can be brought into place in a timely way. Then Canada would be able to begin applying more pressure, as it rightly should, to folks who are supporting Vladimir Putin and his illegal war in Ukraine.
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- Jun/16/23 10:54:14 a.m.
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Madam Speaker, I would like to understand the rationale behind lowering the significant threshold from 25% to 10%. Indeed, the New Democratic Party supported this amendment after hearing testimony during the debate at committee on why Canada should be a leader in money laundering to adopt a more progressive threshold, which was outlined by the RCMP.
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- Jun/16/23 10:54:52 a.m.
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Madam Speaker, as the member likely knows, when we talk about problems in the tax regime and folks who would like to evade paying their taxes, they can often structure their business in a way to come right up to the threshold but not exceed it. Therefore, with a 25% threshold, the concern is that it leaves a lot of latitude for a corporate organization to be able to go right up to a relatively higher threshold.
However, as I say, if Canada is going to have a lower threshold, which I am quite open to as an idea, that is not a decision that can be just taken here in Ottawa alone. It is a decision that the provinces have to go along with. It sounds like we are not there yet, unfortunately. I do not think we should delay setting up the registry while that conversation happens, and I certainly encourage the federal government to have a strong dialogue with the provinces about how to get that threshold lower. We should enable the government to set up that infrastructure now, while those conversations are happening, instead of insisting on the conversation before the infrastructure.
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- Jun/16/23 10:55:59 a.m.
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Madam Speaker, I thank my hon. colleague for his very detailed and interesting speech. With regard to the last question, it was mentioned that Canada could become a leader in the fight against tax evasion. Would this not require a major revolution?
I will give an example. There have recently been document leaks. Radio-Canada reported that Canada recovered 20 to 30 times less money than European countries. We also learned that even Revenu Québec recovered more money than the Canada Revenue Agency, and that is just for Quebec. Is that not outrageous?
We really need to send a message to the Canada Revenue Agency and the government that they need to do a lot more.
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- Jun/16/23 10:56:45 a.m.
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Madam Speaker, I thank my colleague for the question. A Canadian author, Alain Deneault I believe, wrote a book that describes the role played by Canadian banks in the creation of the entire international infrastructure of tax havens.
We need a major change in culture in Canada, not just in government, but in the banking sector, which is truly an integral part of this entire international enterprise. We have work to do.
We must change how we think about this to ensure that Canada is no longer a place where it is impossible to obtain justice for accountants who want big corporations to pay their taxes, and not just the Canadian workers who are footing the bill.
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- Jun/16/23 10:58:02 a.m.
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Madam Speaker, I just want to emphasize that, when we talk about corporations and laundering and so forth, it is important to recognize that many of these companies are actually under provincial jurisdictions. With the federal government bringing forward legislation of this nature, this demonstrates leadership and the hope that the provinces and territories would do likewise. Both complementing each other would give strength to what is actually being proposed.
Could the member expand on that particular point?
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- Jun/16/23 10:58:43 a.m.
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Madam Speaker, this is certainly an area for federal and provincial co-operation.
As I said before, what is important is that we create the legislative mandate for the federal government to move forward as expeditiously as possible, and that the government take a lot of the constructive feedback that has already been offered in the course of this debate into very serious consideration. It should take that into their conversations with the provinces and territories so that we could build the best possible public beneficial ownership registry.
What we have in the legislation now is good, but it could be better. However, we do not need it to be better to get started on all the work that needs to happen in order to start applying pressure to folks like Putin's buddies who are stashing cash here in Canada.
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- Jun/16/23 10:59:40 a.m.
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Madam Speaker, I rise today to congratulate all graduates across Canada, especially those in my riding of Don Valley West.
Graduation marks the culmination of years of hard work, opening the door toward a future filled with endless possibilities.
I would say that the graduates at Leaside High School, Marc Garneau Collegiate Institute, York Mills Collegiate Institute, École secondaire Étienne-Brûlé and Northern Secondary School are the generation of leaders to come, innovators and change-makers. As they embark on their new adventures, I encourage them to stay curious and be courageous while pursuing their dreams.
I also recognize the integral role played by the teachers, administrators, parents and guardians, who have supported graduates in our elementary, middle and secondary schools. Their support, encouragement, advice and love for all of these graduates will shape their lives in the future.
I say congratulations to the graduates. May their futures be filled with excitement, happiness and fulfillment.
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- Jun/16/23 11:00:46 a.m.
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Madam Speaker, I give a big shout-out to the dedicated staff at Langley Memorial Hospital, who continue to deliver top-quality health care despite many challenges, such as a lack of personnel, space and resources.
Despite our Prime Minister doubling the national debt, our hospitals and clinics are suffering more than ever. Conservatives will cut the waste, speed up approval for foreign-trained doctors and nurses, and start to piece together what the Prime Minister has broken.
Also, I thank the Langley branch of the Rapid Relief Team for throwing an appreciation barbecue last month for the dedicated staff at our hospital. I want to thank it also for the personal invitation to be at that great event. As its members live out the Christian principles of care and compassion, their efforts to bring relief and encouragement at home and abroad are noticed and appreciated.
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- Jun/16/23 11:03:04 a.m.
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Madam Speaker, I rise today to pay tribute to James Wilfred Eagle, a decorated veteran and respected community leader among the Ojibwa people, who passed away in April.
Jim Eagle served in Korea with the Princess Patricia's Canadian Light Infantry and went on to serve for 25 years in the CAF, reaching the rank of sergeant.
Jim was a residential school survivor. He spoke his language fluently and provided for the indigenous community through his work with the Odawa Native Friendship Centre and the Wabano Centre. He was leader of the Ottawa chapter of the National Aboriginal Veterans Association, where he was instrumental in creating the National Aboriginal Veterans Monument in Confederation Park in Ottawa.
Jim left behind his beloved wife Cecilia, children, grandchildren and great-grandchildren.
We owe Jim a deep debt of gratitude. He was a warrior. He was a true hero. He lived a good life.
Meegwetch, Jim.
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- Jun/16/23 11:04:13 a.m.
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Madam Speaker, I rise today to celebrate the career of two United Church ministers, Carol Fletcher and Jeff Cook.
At the end of June, Carol and Jeff will retire after 35 years of ministry at Transcona Memorial United Church, serving the congregation and the wider community. In the course of their exemplary community ministry, Carol and Jeff have answered Jeremiah's call to seek the welfare of the city we are in.
Since coming to TMUC in 1988, their stewardship has supported the Transcona Food Bank, Families Connecting groups, the nursery school, the Transcona Council for Seniors, the Transcona scouting movement, and put Transcona on the map with the world messy church movement, among other things.
In recognition that Jesus loves us as we are, Jeff and Carol guided our congregation to formally becoming an affirming ministry. They created opportunities to learn what it means to live as treaty people, and they fostered connections with newcomers, nurturing English conversation groups and most recently providing support to people from Ukraine.
On behalf of the congregation and the wider community, I thank Jeff and Carol for their good work and wish them all the best in their next chapter.
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