Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 6 - Evidence - April 28, 2010
OTTAWA, Wednesday, April 28, 2010
The Standing Senate Committee on Banking, Trade and Commerce met today at 4:20 p.m. to study Bill S-3, An Act to implement conventions and protocols concluded between Canada and Columbia, Greece and Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
Senator Céline Hervieux-Payette (Vice-Chair) in the chair.
[Translation]
The Deputy Chair: I would like to call the meeting to order. This afternoon, the Standing Senate Committee on Banking, Trade and Commerce will be studying Bill S-3, an Act to implement conventions and protocols concluded between Canada and Columbia, Greece and Turkey for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
[English]
This bill was introduced by the Leader of the Government in the Senate on March 23, 2010, and was referred to us on March 31, 2010. Honourable senators may recall the hearing we held on Bill S-8 on December 9, 2009. Bill S-3 and Bill S-8 are the same bill, but Bill S-8 died on the Order Paper when Parliament was prorogued on December 30. Today, as during our examination of Bill S-8, we are joined by officials from the Department of Finance Canada. We welcome the department's view about the fiscal, commercial and foreign policy implications of the proposed bill.
[Translation]
We have with us Mr. Alain Castonguay, Senior Chief, Tax Treaties, Tax Legislation Division, Tax Policy Branch; Mr. Tim Wach, Director, Legislative Development and Chief Legislative Counsel, Tax Policy Branch; and Mr. Parry Athenaios, Expert Advisor, Tax Treaties, Tax Legislation Division, Tax Policy Branch.
[English]
Each of our witnesses is with the Department of Finance Tax Policy Branch. With that, we would be pleased to hear your opening statement.
Alain Castonguay, Senior Chief, Tax Treaties, Tax Legislation Division, Tax Policy Branch, Department of Finance Canada: Thank you. We are here to talk about Bill S-3, a bill to implement three new tax treaties with Colombia, Greece and Turkey.
Canada has among the most extensive networks of income tax treaties. We currently have 87, and that number will go up to 90 if these three treaties become the force of law.
Interestingly in this bill that Greece and Turkey are the last two OECD member countries with which we have never had a tax treaty. It is an important development. These three treaties follow the OECD model, which is a model that we use in all of our negotiations and is used in negotiations worldwide. There are about 3,500 treaties, and most of them are based on the OECD model.
Income tax treaties of the type included in this bill today are used to eliminate double taxation and barriers to trade and encourage trade and investment. They do that by allocating taxing rights among the two jurisdictions, reducing the incidents of withholding taxes that the countries have in their domestic laws and ensuring that our own investors and taxpayers are not discriminated against in other countries.
Of course, double taxation can arise from time to time, and to that end, the treaties also include a mechanism to handle issues of double taxation where the two states get together in order to ensure that the income is taxed only once.
Another important goal of tax treaties is the prevention of fiscal evasion, so they all include provisions that provide for the exchange of information between the tax authorities in the respective states, which is critical to applying our tax laws in respect of income earned abroad.
If the bill is adopted this year, and the same happens in the three countries, then the treaties would come into force this year and take effect next year. We have been told recently that Greece has completed their internal approval procedures, and in the case of Colombia and Turkey, implementation legislation has been tabled and is being processed in their respective parliaments.
Those are my remarks.
[Translation]
The Deputy Chair: How long did it take you, not counting prorogation, to prepare this bill, which is rather lengthy? How long did your negotiations take?
Mr. Castonguay: The negotiations with Columbia took about one and a half years, which is rather quick.
The negotiations with Greece and Turkey were somewhat particular. I would even go as far as to say that they were unconventional, since one of the cases took about 20 years and the other one took even longer.
I think our negotiations with Greece took 25 years, for a number of reasons. In the case of Turkey, we came close to concluding negotiations on several occasions, but either Turkey or Canada would amend national legislation or treaty policies, thus rendering the treaty between our two countries no longer up-to-date and in need of reformulation. The process took time, but this is an exceptional case. Most negotiations are concluded in about two or three years.
The Deputy Chair: I suspected that there must have been rather long delays involved in some cases, and we often do not take note of such delays until the end of the process. We all hope that there will be no prorogation this year, so that we can submit the treaty to the House of Commons as soon as possible.
Senator Massicotte: I would like to continue in the same vein. I have been in the Senate for seven years — already — and we have approved several treaties during that period. We are always told that the procedure is pretty standard, that we are following an international model developed by the UN, for instance. We are provided with a summary of the various tax rates, and we are told that the rest is standard procedure. However, I am wondering why, if the procedure is indeed standard, it takes so long to negotiate an international agreement?
Mr. Castonguay: First of all, while the procedure is standard, each treaty is unique in its own way. In any given case, we insist that the treaty take our vision into consideration. The other party does not always agree, and that is why the procedure takes time. We can spend a lot of time on one provision because the other country approaches the issue in a completely different way, and it takes time to reconcile our respective views. Clearly, it is a case of give-and-take.
Senator Massicotte: What are the points you are talking about? Could you give us an example of two or three points that could be discussed or negotiated?
Mr. Castonguay: For instance, according to the OECD model, pensions are taxed only in the country of residence. We do not follow that model. We have already pointed out to the OECD that we do not see things the same way in Canada. That is the case simply because in Canada, contributions to pension plans are tax deductible, resulting in delayed taxation. Clearly, this system operates on the assumption that the person withdrawing benefits from their pension plan will be subject to tax in Canada. If someone was to move to another country, and we were to follow the OECD model, we could not tax that person's pension income. Therefore, we insist on basic taxation of those amounts, and we have to convince the other party that our arguments are legitimate.
Senator Massicotte: So all negotiations revolve around rates, which take up 90 per cent of the negotiation process, is that right?
Mr. Castonguay: No, we are not only talking about rates. We could be talking about many other things. Sometimes, it is just a matter of one or two words, and things can get very technical.
Every country has its own method of applying the provisions, which can differ a little or a lot from the OECD method, and everyone strives for consistency in their treaty network. A country with 50 or 60 treaties wants its treaties to be viewed in a certain way, and Canada wants the same thing. So, we have to find ways to reconcile our respective approaches to applying the provisions.
Senator Massicotte: So, the next time you tell us that we are talking about a standard international agreement, we should not listen to you because there is nothing standard about it.
Mr. Castonguay: We may express things differently in our treaties, but they should be the same at their core.
We have to give in to the other country on certain points if we want to conclude an agreement. I will give you an example of different approaches. The three treaties we are discussing today contain a provision stating that a company that does business in another country can be taxed only if that company is a permanent establishment. That term is defined in the treaties. Several developing countries want to have a notwithstanding provision stating that people doing business there who do not own permanent establishments, but who provide services in those countries, should also be taxed. That differs from our approach. It is something that must be negotiated. Ultimately, we look at the compromises each side is willing to make.
Senator Massicotte: According to the table that determines the rate of taxation, the dividends and the interests, it is always the same rate that applies. Countries would like this to be different, but such is always the case.
Mr. Castonguay: Yes. That is why rates can vary from one country to the next. Some countries insist on having higher rates, that is their policy.
Senator Massicotte: Why are the rates higher in the three cases we are discussing?
Mr. Castonguay: In the case of Turkey, we are not talking about a recent negotiation; those rates were negotiated a very long time ago. If you look at the table that includes deductions at source, you can see that in all of Turkey's treaties, we can distinguish one main difference between the treaties Turkey has with developed countries like Canada, Great Britain and the United States, and countries where Turkey is the net foreign investor. In the case of treaties with developed countries, rates tend to be higher because the net investments are more often made in Turkey. So, as far as the treaty is concerned, the developing countries are considered to be the countries of source. Therefore, it is to Turkey's advantage to tax income earned in their country. In the case of countries where Turkey is the net foreign investor, the rates tend to be lower to limit the taxation of Turkey's own investors.
Senator Massicotte: I have one more question, if you do not mind. We have a lot of treaties; in fact, we have 87 of them and are currently working on six others, including one with France, and another with Italy. I am surprised that we have no treaty with France, since we do a lot of business with the French. Is there a reason for this?
Mr. Castonguay: We have a treaty with France. The protocol was signed last year by France and by Canada.
Senator Massicotte: It was signed, but it is not yet in force.
Mr. Castonguay: We need to continue working on implementing the treaty so that it can come into force. I think that in this particular case, we will proceed by order in council, since we have the authority to do that.
Senator Massicotte: So, there are some formalities left?
Mr. Castonguay: Yes.
Senator Massicotte: Will it replace an existing treaty?
Mr. Castonguay: No, this is a minor amendment to two provisions of an existing treaty, and it is intended to extend the scope of the New Caledonia treaty and to include a new provision on information exchange.
Senator Massicotte: Why do we not have agreements with Spain?
Mr. Castonguay: We have one dating back to 1976, and we are currently negotiating with Spain.
The Deputy Chair: Are you saying that France has no treaty with Canada?
Mr. Castonguay: We do have a treaty currently in effect.
The Deputy Chair: So you are talking about timely amendments.
Mr. Castonguay: That is right.
The Deputy Chair: How big is the team in charge of negotiating the treaties? I ask because I get the impression that you may need more people to conduct your studies.
Mr. Castonguay: Three of my staff are working on the negotiations, and we are getting help from the Revenue Canada people.
The Deputy Chair: I want my colleagues to know that with limited resources and 200 countries to cover, you must work very fast. When people are ready to negotiate, you have to be ready.
Mr. Castonguay: Of course, we have to make choices based on the resources available to us.
Senator St. Germain: Senator Massicotte has already asked my question.
Senator Massicotte: That will cost you $20.
[English]
Senator Harb: Clause 6 talks about income from immovable properties. There is a good chance that if someone has an operation of sorts, a property in Greece, Turkey or Colombia, those countries will tax that property.
Mr. Castonguay: That is correct.
Senator Harb: In Canada is there tax on the differential between the taxation level in those countries and what we would have taxed them otherwise, or is the taxpayer only taxed once?
Mr. Castonguay: When the state of source has the right to tax income, in this case income from immovable property, they have the first right to tax. The country of residence of the taxpayer has to provide any offset to avoid double taxation.
If $30 of tax has been assessed in the other country and our tax on the same amount is $40, we will provide a $30 tax credit to ensure that the overall tax does not exceed, in this case, our tax.
Senator Harb: However, it is still double taxation, in a way, on the individual, right?
Mr. Castonguay: It is shared taxation. They get the $30 and we get the residual amount.
Senator Harb: Under this article, do mines qualify as immovable properties?
Mr. Castonguay: Yes, they do.
Senator Ringuette: I cannot help but ask what the costs have been to negotiate with these three countries over the last 25 years.
Mr. Castonguay: I arrived in this section in 2006, so I could not answer the question.
Senator Ringuette: Could you give me a guesstimate?
Mr. Castonguay: I do not think we negotiated every year during that period. There were periods where nothing happened or where there were just telephone calls or exchange of letters. I would not even attempt an answer.
When you negotiate, either the other side comes here or we travel there. Usually the negotiations take, on average, two rounds. In this case it was more than that.
[Translation]
Senator Ringuette: Mr. Castonguay, I am somewhat disappointed that your colleague Mr. Lalonde is not here today. We are used to seeing him with you.
Regarding this bill, its earlier version was before the committee on October 12.
Mr. Castonguay: I believe that was in December.
Senator Ringuette: I apologize, it was on December 10. At that time, I asked Mr. Lalonde some very specific questions. You were there. Over the 25 years of contract negotiations, what is the estimated amount of tax evasions involved? I asked Mr. Lalonde this three times in December, and I have yet to get an answer.
The Deputy Chair: Could you repeat your question? I do not understand it.
Senator Ringuette: I will repeat the question I asked Mr. Castonguay and Mr. Lalonde three times last December, word for word. The question was the following:
[English]
What is the estimated tax evasion between Canada and the three countries we are looking at?
Mr. Castonguay: I think the answer that Mr. Lalonde volunteered at the time is that if we know about it, we will do something about it.
Investigating tax evasion requires the tools to access information. The key about international tax evasion, that is when someone thinks that they can put their money in the other country and have it sheltered from the fiscal year, is to be able to go to the other country and ask questions about that person's investments, bank accounts and the like.
While we do not know exactly what that number is, we know we will have tools in the future to be able to minimize the extent of tax evasion to the extent that it occurs right now. It is one of the reasons we enter into treaties. When we enter into treaties we know there is a critical mass of Canadians who either have businesses there or are established there and earn income that is potentially taxable here. That is one of the purposes of entering into tax treaties, to have the tools to access information about those Canadians.
Senator Ringuette: The quasi-answer from Mr. Lalonde in December was the following:
My understanding is that there is follow-up. The Canada Revenue Agency is a member of an organization called the Joint International Tax Shelter Information Centre, JITSIC. Through that organization, countries specifically look at new and emerging tax avoidance and tax evasion transactions. The Canada Revenue Agency does that. It has been given funds to pursue international tax avoidance and tax evasion.
About a minute later Mr. Lalonde promised that he would send my question to the Canada Revenue Agency in order to get answers in regard to these three countries. We still do not have any answers, and for the second time we are asked to pass a bill. You stated earlier that you only have a three-person unit conducting negotiations, so there must be priorities. I hope those priorities are based on bigger numbers when attached to a country in regard to this Joint International Tax Shelter Information Centre. You must be sharing information with the Canada Revenue Agency and I hope they are sharing information with you.
Mr. Castonguay: It is the duty of the Canada Revenue Agency to administer our treaties and the law generally, and they are on their own in that regard.
If there is a request we can pass on to them we can certainly do so.
Senator Ringuette: That request for information was made in December and we are now at the end of April. Parliament was prorogued, I understand that, but I do not think that the Department of Finance and the Canada Revenue Agency were prorogued at the same time.
I have some questions in regard to the estimates. With the amount of time and money that Canadians invest in pursuing these treaties, is it — as the auditor would say — value for money? Without the information, it is hard for us to ascertain.
How do you decide which are the priority countries that you will spend the next 20, 25 years pursuing for a treaty?
Mr. Castonguay: First of all, as I said, a typical negotiation does not last that long. There is a variety of sources of input: In Canada enterprisers will approach us or the Department of Foreign Affairs will approach us, stating interest of states to enter into tax treaties with us. In each case we do an analysis of the volume of the trade and investment flows between the two countries to see whether we have a minimal critical mass that would warrant a negotiation and of the tax system. Is double taxation relief required to start with? Do they have an efficient tax administration? On that basis, with the limited resources we have, we make decisions and set priorities.
Senator Ringuette: Since December I was part of a delegation to Argentina, meeting parliamentarians there, and the issue of the treaty with them was raised. Understandably they are happy because they are anticipating that many Canadians will retire to their sunny country as a result of the treaty.
That is why I am very interested in the effects, the value and all of that. With all due respect, we are asked to agree to legislation when we do not really know the bottom-line effect. I have some reservations.
Senator Moore: Mr. Castonguay, you mentioned in your opening remarks about the coming into effect, entry into force. I see it is a little different with each country.
The simplest one is the one with regard to the country of Turkey. It says:
Each Contracting State shall notify to the other the completion of the procedure required for the bringing into force of this Agreement in that State. The Agreement shall enter into force on the day when the latter of these notifications has been received.
If this bill becomes law in Canada, say in May, what happens in Turkey? Are they now under way in that country at the same time to pass a similar bill into law?
Mr. Castonguay: My understanding is that they are. Obviously each country has different procedures, but it has been introduced and it is progressing through their system as well.
Senator Moore: How do you know officially that it has been passed and is law in that country? Do you get a certified copy of the bill? Do you get an official notification from the Minister of Finance or the counterpart? How does that work?
Mr. Castonguay: The usual procedure is for a diplomatic note to be sent to the other country informing that all necessary procedures have been completed. The other side does the same, and it is the date of that second notification that triggers entry into force.
Senator Moore: What do you send? Does your department or does the minister send a note to the participating countries?
Mr. Castonguay: The Department of Foreign Affairs is responsible.
Senator Moore: Once it becomes law in Canada, that department issues required notice to the other country?
Mr. Castonguay: That is right. We work closely with them, because they are responsible for the overall treaties of Canada and we obviously inform them of developments. They also get information from the field, from our embassies and so on.
Senator Moore: That brings the agreement into effect. Then the actual provisions take effect January 1 the following year?
Mr. Castonguay: That is right.
Senator Moore: In this case, if it passes, it will be 2011.
It is interesting that we are doing this now with Greece. In view of its financial woes, do we have any apprehension there of their willingness or ability to meet their obligations under this agreement?
Mr. Castonguay: I have no reason to believe so. In fact, to the extent that this treaty can further encourage bilateral trade and investment, it will be good for them. They have passed their legislation in Greece, so they are waiting for us.
Senator Moore: Do you know how far along Colombia and Turkey are in the process?
Mr. Castonguay: I do not have very much information because they have different systems, committees and so on, but they have been tabled.
Senator Moore: Do you get the official word at the end, or is our ambassador there keeping you abreast of developments?
Mr. Castonguay: We do ask from time to time, either the desk office or the embassy.
Senator Moore: We have heard about the volume, the 200 countries that you administer. In view of the fact that this bill adds three additional countries is it a priority? I am trying to figure out where you and your three colleagues will spend your efforts. Is this top of the pile?
Mr. Castonguay: I think the biggest part of the effort is behind us. It is just making sure the other countries complete their obligations in getting their treaties into force and, to the extent we can encourage that through our own channels, we do.
Senator Moore: Are you saying yes?
Mr. Castonguay: Yes. It is a priority, obviously. Once we sign treaties we want them in force as soon as possible, absolutely.
Senator Greene: I think this is a wonderful bill, and I hope we pass it as soon as possible. I think we deserve to have a tax treaty with these three countries and those three countries deserve to have one with us.
I have a general question about the treaties we currently have. A number of the countries are interesting ones, to say the least. Have we ever had a case where we have had to cancel a treaty with a country, as a result of a regime change or because they, for whatever reason, did not honour the treaty? What would happen then?
Mr. Castonguay: I understand that a treaty has never been terminated for that reason. Canada terminated one tax treaty. It was with South Africa at the time of apartheid. It had to do with informing the government policy on that issue.
Senator Moore: Has that been restored?
Mr. Castonguay: Yes.
Senator Greene: That is the only time?
Mr. Castonguay: Yes.
Senator Greene: In each and every case then, the interests of Canadians have been protected when a regime has changed in other countries?
Mr. Castonguay: That is the benefit of having a tax treaty. A treaty is paramount in domestic law in most countries.
Senator Massicotte: Does the treaty contract allow any country to unilaterally cancel the agreement at any point in time?
Mr. Castonguay: Yes, there is a termination provision, the last provision.
Senator Massicotte: With 30 days' notice or something?
Mr. Castonguay: Actually, it is six months' notice, yes.
[Translation]
The Deputy Chair: Has Canada evaluated the OECD's taxation systems, the revenue-raising ability of OECD countries, and the way in which the taxation system is actually administered? We certainly do not operate in the same way when it comes to information technology and taxation in general. Business taxes, taxes on individuals and the VAT are the main sources of revenue for Canada, but we know that there are countries that secure their funding more through taxes on goods and services than on individuals.
When you study bills, do you have a good idea of how other countries' taxation systems have been assessed so that we do not come out of the agreement economically disadvantaged? Do we know if the outcome will in fact be equally advantageous for both countries involved?
Mr. Castonguay: The treaties apply only to income taxes, and not to other kinds of taxes. We have to have a good idea of how the other country's taxation system works. Clearly, taxation systems are extremely transparent. Nowadays, it is quite easy to get information, and also to get information by informally questioning our colleagues to determine the nature of a country's tax system.
What matters to us is that a country's taxation authorities be effective. A treaty requires that we administer the agreement and be able to establish good relations with the other country. To do that, we may request information from the country and try to resolve cases of double taxation when they arise. This is an important parameter to consider when deciding whether it would be worth our while to conclude a treaty.
The Deputy Chair: So, before you jump right into negotiations, you have to get information on the country you are negotiating with.
Mr. Castonguay: Absolutely.
The Deputy Chair: The agreement with Turkey was signed on July 14, 2009, the one with Greece on June 29, 2009, and the one with Colombia on November 21, 2008. I was under the impression that the free-trade agreement and the tax treaty were related. From what I can see, the free-trade agreement came afterwards, and the tax treaty was still not in force.
Mr. Castonguay: If I am not mistaken, the two agreements were signed at the same time in November 2008.
The Deputy Chair: Okay.
Senator Massicotte: I have another question. One of the things we read about Greece in the newspapers is that a lot of people do not pay their taxes over there. It is a challenge the country is facing, and the media are reporting on it openly. Greece is trying to straighten out its taxation system, just as other countries are doing. Does this situation affect us? In other words, are there taxes that we will not be able to collect because of a lack of discipline, if you will? Here, people are more disciplined, and they have a greater respect for their duty towards their country. Greek people will pay their taxes here. Are we the winners or the losers in this agreement?
Mr. Castonguay: It is difficult to answer. I do not want to pass judgment on the quality of the fiscal administration system.
Senator Massicotte: And if we were adversely affected?
Mr. Castonguay: It is hard to say. If Greece is having trouble collecting taxes, and that issue is affecting its citizens, I am not sure to what extent the situation would impact our treaty in terms of taxation of Canadians who do business in Greece or live there. We are assuming that everybody respects their tax obligations.
Senator Massicotte: We do not know the answer to that question.
Mr. Castonguay: It is hard to say.
[English]
Senator Gerstein: Did I understand you to say with regard to income tax conventions that basically the direction is given to you from Foreign Affairs?
Mr. Castonguay: They do provide advice on where we should go, and it is one of the parameters in our decision. It is not the only one.
Senator Gerstein: I suspect that in an evaluation, the criteria that you would put forward might include international relationship — for example, the South African situation — the global economy, double taxation, investment, elimination of tax avoidance, those types of things?
Mr. Castonguay: That is correct.
Senator Gerstein: Would I also be correct in saying that the concept of value for money is probably very low on the radar screen, if on it at all?
Mr. Castonguay: I am not sure I understand.
Senator Gerstein: As I look at this list of 87 countries with which we have treaties in force at the present time, there are obviously major countries and small ones. There are X number of countries in the world and you are negotiating here and there. All I am suggesting is that what is driving these arrangements is not a value-for-money concept.
Mr. Castonguay: We enter into negotiations and ultimately sign treaties because the conclusion was that there was sufficient trade and bilateral relationship to warrant it.
Senator Gerstein: Investment and bilateral relations.
Mr. Castonguay: Absolutely, yes.
The Deputy Chair: I was part of an organization that discussed the tax treaty with Germany, and it took quite a long time. It involved preventing some investment from taking place. We were penalized but they were as well because when you have double taxation you want to go elsewhere. Certainly commercial parties are interested in having treaties, especially with countries that are big in terms of export.
It is not like a budget here, where the tax is applied the day the budget is tabled. In this case it will apply only next year, as you mentioned.
Mr. Castonguay: We distinguish between taxation of net income, which is done on a calendar basis for individuals, and on a 12-month basis for corporations and withholding at source, which I guess can occur at any time. It is usually in order to give the respective tax administrations some lead time. That is why our approach is to start January 1. There are exceptions, but usually it is January 1 of the next year.
The Deputy Chair: You are under the impression that both of the ministries or departments of revenues are preparing to apply that, but you are confident that the three countries will have done their homework as well?
Mr. Castonguay: Yes. We have lots of time left this year. I am highly confident. I would be surprised otherwise.
[Translation]
Senator Mockler: I have some limited experience in negotiating agreements, so I understand, Mr. Castonguay, that it is certainly not easy work, especially when we do business with countries. Looking back on the last 25 years, I am someone who believes that we do not need a whole army of persons to conclude agreements, regardless of the level involved.
My understanding is that what is important, when considering the bill at hand, is having an internal negotiation mechanism that would enable us to apply the treaty. Could you give us an in-depth description, taking into consideration the three countries and the bill we are currently discussing, of how this mechanism is being developed? Could you describe the process to us by giving us an example?
Mr. Castonguay: As for the three countries we are discussing, they already have tax treaties, and some have extensive treaty networks. Like us, they already have people whose mandate it is to oversee the implementation of existing treaties. In Canada, that job belongs to the Canada Revenue Agency, and the three new treaties will be added to their workload. They have the expertise, the knowledge and all the other necessary tools. Once the treaties come into effect, we will have to establish a relationship between the Agency and the other country's fiscal administration system. The mechanism should be based on the exchange of taxpayer-specific information, the exchange of information on the development of our respective taxation systems that could affect the application of the treaty.
The most important thing, clearly, is resolving cases of double taxation when they arise. In such instances, the administrations of the two countries should exchange letters, or, if the issue is particularly complex, meet in order to resolve it.
Senator Mockler: Another point of interest is the issue of peoples' privacy. We could call it ``Privacy consideration.'' Can you assure us that this bill is in line with the requirements set out in the Privacy Act?
Mr. Castonguay: That is an interesting question. Obviously, in Canada we have laws that protect the confidentiality of information provided by taxpayers when, for instance, they file their income tax returns. The treaty ensures that, when information is exchanged in one country, the same standard applies in the other country. Article 26 of the treaty stipulates that the other country is obligated to handle the information in a confidential manner. So, there is a free- standing provision that ensures that confidentiality is respected.
Senator Mockler: I would like to follow up on Senator Ringuette's question. I do not intend to list the 87 treaties we have implemented, but during the 25-year period in question, we certainly had highs and lows in the negotiation process, or, I should say negotiation breakdowns for specific reasons. Sometimes these breakdowns were due to issues related to terminology. At other times there were due to economic conditions, particularly in the case of some countries whose economies fluctuate based on economic conditions on their continent or in the country itself.
My question is the following: during this 25-year period, how much time was actually spent on serious discussions to conclude the agreements?
Mr. Castonguay: I can tell you about the time I have been here, since I am the one who concluded the treaties with Turkey and Greece. I can only talk to you about what I know. It took one full week of negotiations to conclude the agreement with Greece, in June 2007, if I recall correctly.
In the case of Turkey, we had only one or two outstanding points, and they were resolved through e-mail exchanges. We had been ready to conclude the agreement with Turkey for quite some time, but it was difficult to get the same level of commitment from the other side. I cannot explain to you what was going on internally in their administration, but, at some point, concluding the agreement also became a priority for them, so the agreement was concluded.
Senator Mockler: When did this take place?
Mr. Castonguay: In the first half of 2007, I believe.
Senator Mockler: Thank you very much. Madam Deputy Chair, Senator Moore just reminded me that we have not discussed the case of the third country. Could you tell me how long negotiations with Colombia took to complete?
Mr. Castonguay: We had three negotiation sessions with Columbia beginning in the fall of 2007, and I believe that we concluded the agreement in April 2008. I am not really sure, but the whole process took a little over a year.
The Deputy Chair: I have another small detail to ask about. Do you usually agree on the parameters up for negotiation? Clearly, things may change over time. As a rule, who requests that changes be made? Is it Canada or the other countries?
Mr. Castonguay: There is no one answer to that question. Sometimes changes are requested by Canada, and sometimes by the other countries. As for ways of doing things, each country has its own model to follow. We discuss our respective models and try to reconcile any differences until we reach an agreement.
Senator Massicotte: It is no secret that these agreements are very important to our country. We need them. Negotiations are difficult, and you are our representative. In the end, if the negotiation does not turn out well, it is somewhat your responsibility. How does the department go about appointing the negotiator? How is the best person for the job chosen? Negotiations take a long time. If you read the newspapers, and they are saying that the negotiations are not going well, it must mean that you are no good at your job! How does the department succeed in always having the best negotiator?
Mr. Castonguay: I do not know if we can assume that we have the best negotiator. For now, negotiating is my job, until my boss decides that there is someone better suited for the job.
As far as the length of negotiations, we clearly prefer not to finalize negotiations if we are getting a bad deal. That is why, sometimes, negotiations take a while.
The Deputy Chair: If my memory serves me right, people occupying your position are rarely on the job for only a few months. They are generally there for several years, acquiring in the process knowledge and expertise. This does not mean that there is no renewal, only that there are people who, with time, learn the ropes — I would not say on the fly because the matter is rather complex. Still, these are negotiators who know what they are doing and can introduce other people to this field, that much is clear.
Senator Massicotte: I hope that these are not only pleasant and kind people you are talking about because negotiators also need to be tough. Today, our witness seems very pleasant and gracious, but I hope that he is not always like that!
The Deputy Chair: I think that a good negotiator must be equipped with an iron fist in a velvet glove. That is how we see you, Mr. Castonguay.
If there are no other questions, I will adjourn the meeting and thank my colleagues.
Senator Ringuette: I have a suggestion to make. Before we complete our study on this bill, I would like Canada Revenue Agency representatives to appear before us in order to provide us with information and give us some background on the Joint International Tax Shelter Information Centre. What role do we play in it? If the organization is international in scope, do we fund it through the Agency?
The Deputy Chair: I think that this is not quite related to what we are talking about today. All the other treaties are managed by the same organization. I think that this has nothing to do with the subject matter, which is subsequent relations between negotiating countries once the treaty is signed. The Canada Revenue Agency is the body that is in charge of the follow-up. I do not have a problem with inviting them to discuss things in a broader context. We could eventually have them appear as witnesses at a meeting.
Senator Ringuette: They are involved in this bill because they will be in charge of implementing it.
The Deputy Chair: They are already implementing 87 others treaties. The mechanism does not apply only to that group of treaties. If we want to hear about how treaties are implemented, I do not have a problem with that. What I do have a problem with is delaying the implementation process, which is already behind schedule and can harm Canadian interests, especially the interests of people who mean to invest in Greece — and, on a quick side note, perhaps Greece needs investments, given what is currently going on. I also think that Colombia is counting on us. Yesterday, I met with the Minister of Industry. At this time, the countries we are discussing need developed countries to create jobs over there. Canadian investment is one of the cornerstones of those countries' business activity.
I am not forgetting about Turkey, whose economy is somewhat robust. If my colleagues want to hear from them, it would be fine with me, but I thought that it was rather urgent that we adopt the bill at the next meeting. We could invite Canada Revenue Agency representatives to find out to what extent they are involved and what types of dealings are taking place between the two countries. Are the dealings extensive? Do they take place on a regular basis? We, as people who have investments abroad, know that we pay our taxes to Mexico for the houses we own over there, and it is a fairly straightforward process. We have to have the documentation and follow the laws of the two countries. We need those kinds of sound fiscal management tools.
Gentlemen, I thank you for being here and I thank my colleagues.
(The committee is adjourned.)