House Hansard - 109

44th Parl. 1st Sess.

October 6, 2022 10:00AM

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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House Hansard - 109