- Member of Parliament
- Member of Parliament
- Liberal
- Nepean
- Ontario
- Voting Attendance: 67%
- Expenses Last Quarter: $104,578.46
- Government Page
- 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 10:11:41 a.m.
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Madam Speaker, corporations, joint stock companies, were conceived almost 150 years back as a means for individuals to pool their resources, de-risk their investments and channel their resources for commercial gains. That is the fundamental reason why these corporations exist. It is not the right of any individual, Canadian or someone outside of Canada, to form a corporation. They do not have this right. They can form a corporation, but the details are not made public.
I would like to ask the hon. member whether he agrees that, because it is a privilege offered by the government to individuals to form corporations, the fundamental details of the names of the shareholders and their citizenships should necessarily be made public.
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Mr. Speaker, I will be sharing my time with the hon. member for Richmond Hill.
I rise to speak to Bill C-42, which would implement a public and searchable beneficial ownership registry of corporations governed under the Canada Business Corporations Act.
We have an issue with money laundering and terrorist financing. To deal with this, we need tools and mechanisms in Canada that are in line with international best practices. Creating a public and searchable registry would increase the transparency of beneficial owners of federally regulated Canadian corporations, which would increase corporate accountability and improve public trust in corporate institutions.
These measures would help protect Canadians against money laundering and terrorist financing, deter tax evasion and tax avoidance, and make sure Canada remains an attractive place to conduct business.
I will take a moment to mention what corporations are. Corporations exist basically to allow individuals to channel their capital for the benefit of making profits. The corporation, as we know, came into existence in the 1844 act in Britain, and the shareholders were granted limited liabilities in 1855. In 1866, the United States court declared that a corporation is a natural person. Basically, while the corporation channels the resources for investment in a commercial enterprise, it limits the liability of the person to the capital contributed.
I will quote from an article published in New Internationalist:
What is a corporation? Ambrose Bierce's Devil's Dictionary defines it as “an ingenious device for obtaining profit without individual responsibility”. It is a legal construct, a charter granted by the state to a group of investors to gather private funds for a specific purpose. Originally, charters were granted in the service of a public purpose, and could be revoked if this were not fulfilled. The relationship between state and corporation is a complex one. Over the past 400 years corporations have conquered territory and brought in resources for the state, breaking laws put in place to constrain them and gaining in power and privilege. History shows a repetitive cycle of corporations over-reaching, causing such social turmoil that the state is forced to rein them back in through regulation.
Now, corporations are being created for no other purpose than to evade or avoid taxes. Supreme courts around the world have ruled on the difference between tax avoidance and tax evasion, and mentioned that if there is any transaction followed by an individual or a corporation that does not have any impact or consequence other than to reduce or eliminate tax, the transaction can be declared null and void.
We need to take all steps to rein back and plug the loopholes that are exploited by individuals and corporations to avoid or evade paying their fair share of taxes.
In budget 2022, we committed to implementing a public and searchable registry of beneficial ownership information. The registry would cover corporations governed under the Canada Business Corporations Act and would be scalable to allow access to the beneficial ownership data held by provinces and territories that agree to participate. The objective of the registry is to provide relevant authorities with timely access to accurate and up-to-date information about the true controlling individuals of corporations in order to combat illegal activities, including money laundering, corruption and tax evasion.
Greater transparency would also improve corporate accountability more generally and thus help protect the public, improve trust in corporate institutions and ensure a well-functioning marketplace. As it currently stands, corporations are already obligated to compile some beneficial ownership information. Upon the entering into force of this new piece of legislation, corporations would need to collect additional information from their beneficial owners, like citizenship and residential address, and send the information in their register of individuals with significant control to Corporations Canada on an annual basis and within 15 days of the day on which a change is recorded in their register.
There are a couple of shortcomings in the current bill, which can be overcome. One is with respect to fully publicly disclosing the names and citizenship of shareholders or members of corporations. The fundamental question is this: Why should the public not be aware of who is investing in a corporation, including their citizenship being known? It is not the fundamental right of any individual that he or she can be a shareholder. It is a privilege offered by the state through various acts, so why should the public not be aware of individuals who are shareholders, including their citizenship?
I do understand the need for their privacy of information like the address of the shareholder, which is something that has been addressed, but there is no reason why the names and citizenship of the shareholders of any corporation should be kept from becoming public. Especially, we Canadians should be aware of foreign nationals investing in Canadian corporations; disclosing their citizenship is a must.
There is another solution, which is that the information may be disclosed only if a threshold of ownership is significant and exceeds a certain mark. For significant shareholding, the threshold is 25% in some jurisdictions and 10% in other jurisdictions. However, using a threshold to limit disclosure requirements creates a loophole that can easily be exploited. If the threshold is fixed at 25%, five people could form a corporation with 20% each or 11 people could form a corporation if the threshold is 10%.
On the positive side, through this bill, we have sought to limit administrative burden by leveraging existing intake and reporting mechanisms that federal corporations are already familiar with. For example, federal corporations are already required to update Corporations Canada within 15 days after a change of directors occurs and to file an annual return.
We have carefully considered domestic and international best practices in developing the proposed beneficial ownership registry regime, including the U.K. system. We also made sure the proposed model would meet and exceed the standards for beneficial ownership transparency maintained by the Financial Action Task Force, a global anti-money laundering and anti-terrorism financing body of which Canada is a founding member.
In closing, I want to reiterate that this is a good bill that is very much required. We have to bring Canadian standards in line with international best practices. However, there are certain shortcomings, which I think should and must be addressed at the committee stage. I am sure that with the co-operation of all parties in this House, this bill will get passed and will become legislation sooner rather than later.
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- Mar/31/23 10:51:20 a.m.
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Madam Speaker, I agree with my hon. colleague on the question of disclosing the citizenship of the shareholders of a corporation. There should not be any legal protection offered to foreigners who invest in Canadian corporations. We have been seeing that corporations are being incorporated with no other purpose than to have transactions and processes that lead to nothing but tax avoidance and, in some cases, even to money laundering.
I want to touch on something the member mentioned about the significant shareholding and the threshold, which is 25% in some jurisdictions and 10% in some jurisdictions. As the member very clearly stated, that is a loophole where, very easily, five people could form a corporation with 20% each or 11 people could form a corporation. Therefore, should there be any threshold at all that prevents the disclosure of the beneficiary?
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- Mar/31/23 10:27:43 a.m.
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Madam Speaker, corporations exist basically to allow individuals to channel their capital for the benefit of making profits. I think the corporation as we know it came into existence in the 1844 act in Britain, and the shareholders were granted limited liabilities in 1855. In 1866, the United States code declared that a corporation is a natural person.
The key thing that I want to focus on is the tax evasion and tax avoidance. Supreme courts around the world have ruled on the difference between tax avoidance and tax evasion and identified that if there is any transaction in the process followed by an individual or a corporation that does not have any impact other than to reduce or eliminate tax, the transaction can be declared null and void.
Coming back to the corporations here, why should the public not be aware of individuals who are investing money into corporations, including their citizenship being known? It is not the fundamental right of any individual that he or she can be a shareholder. It is a privilege offered by the states through various acts, so why should the public not be aware of individuals who are the shareholders, including their citizenship—
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