THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, November 6, 2024
The Standing Senate Committee on National Finance met with videoconference this day at 6:46 p.m. [ET] to study Bill S-264, An Act to establish International Tax Justice and Cooperation Day.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: Good afternoon, honourable senators.
Before I begin, I would like to ask all honourable senators and other participants who are here in person to consult the cards on the table for guidelines to prevent audio feedback incidents. Please make sure to keep your earpiece away from all microphones at all times. When you aren’t using your earpiece, place it face down, on the sticker placed on the table for this purpose. Thank you all for your cooperation.
Welcome to senators and all Canadians watching us on sencanada.ca. My name is Claude Carignan, I’m a senator from Quebec and I’m the chair of the Standing Senate Committee on National Finance. I would ask my colleagues to introduce themselves, starting on my left.
Senator Forest: Good evening and welcome. Éric Forest, Gulf Division, Quebec.
[English]
Senator Pate: Kim Pate. I live here in the unceded, unsurrendered territory of the Algonquin Anishinaabeg.
[Translation]
Senator Loffreda: Good evening. Tony Loffreda from Quebec.
[English]
Senator Kingston: Joan Kingston, New Brunswick.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Ross: Krista Ross, New Brunswick.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Smith: Larry Smith, Quebec.
[Translation]
The Chair: Thank you. Honourable senators, today we begin our study of Bill S-264, An Act to establish International Tax Justice and Cooperation Day, which was referred to this committee by the Senate of Canada on May 9, 2024.
We are pleased to welcome the Honourable Pierre J. Dalphond, sponsor of the bill, Brigitte Alepin, a tax specialist and tax policy advisor, tax professor at the Université du Québec en Outaouais, and Lyne Latulippe, professor, Department of Taxation, School of Management at the Université de Sherbrooke.
Welcome to all of you, and thank you for accepting our invitation to appear today. We will now hear an opening statement from Senator Dalphond, followed by Ms. Alepin and Ms. Latulippe. Senator Dalphond, you have the floor.
The Honourable Pierre J. Dalphond: Dear colleagues, I’m very pleased to be here this evening to speak to Bill S-264, An Act to establish International Tax Justice and Cooperation Day.
Of the more than 200 international days recognized by the United Nations, none has anything to do with taxation. Yet taxation is a key part of the social contract that unites societies around the world.
This day would not only be an opportunity to use a moment to remind people of the importance of taxation in general and of fair taxation in particular, but also to debate it.
[English]
Scandals such as the Pandora Papers, the Paradise Papers, the Panama Papers — and I’m sure there are many other papers — demonstrate that many taxpayers, often wealthy, deliberately flout the rules. All these tax scandals are a disaster and affect Canadians’ confidence in their institutions and their tax regime.
Tax justice and tax cooperation are intimately linked; in an interdependent world, one cannot exist without the other. Tax collection falls under the full sovereignty of each state. To ensure effective fiscal cooperation, their consent is essential. Naturally, some states wield taxation as a weapon to attract capital and investments. The downside for states that do not engage in more aggressive tax practices is narrower tax bases, reduced revenues, fewer public services and higher taxes for the majority. The primary casualties of this tax competition are often the most vulnerable countries.
In the long term, I wonder if there are any winners in such tax competitions.
However, tax cooperation is often slower than the globalization of the economy. Nevertheless, we should welcome the growing awareness among policy-makers worldwide, sometimes spurred by public opinion pressures. Numerous initiatives have been launched and realized in recent years, either bilaterally or, more notably, through major international organizations, foremost among them the Organisation for Economic Co-operation and Development, or OECD, which includes 38 countries representing over three quarters of global gross domestic product, or GDP.
[Translation]
In 2019, a global minimum tax on corporate profits was proposed under the aegis of the OECD. A total of 130 countries have committed to ratifying it. Like some 40 other countries to date, Canada did so with the passage of Bill C-69 on June 20.
Brigitte Alepin will certainly be in a better position to tell you about all the significant progress made in recent years in terms of tax cooperation.
It was at the end of the First World War that the issue of fiscal cooperation became particularly acute. The cost of reconstruction required tax increases, which led to a flight of capital and wealth. This required cooperation to avoid double taxation of companies doing business in multiple states, as well as to deter tax avoidance.
In 1922, the tax cooperation movement was launched at the Genoa Conference, attended by 34 countries. A permanent international tax committee was set up under the aegis of the League of Nations. That tax committee held its first meeting on June 4, 1923. That’s why we are proposing to designate June 4 as the International Tax Justice and Cooperation Day.
This bill is a first step. It will then be up to the Canadian government to establish recognition of such a day at the United Nations in order to advance the debates and encourage countries to talk about international tax cooperation and tax justice.
Once again, I’d like to thank Brigitte Alepin, who is with me today and who is truly the muse behind this bill. She’s a recognized and infallible tax expert and she’s motivated to achieve greater tax justice, not only in Quebec, but in Canada and around the world. I was delighted when she asked me if I’d be willing to work with her on this project for an international tax day. Like her, many actors and organizations work on a daily basis to advise and train political leaders around the world to improve and harmonize tax legislation, with the aim of achieving greater tax justice.
As legislators, we must certainly play a role in ensuring that the rules are fair and rigorous. This kind of more symbolic initiative also serves to remind not only Canadians but all other countries of our commitment to these fundamental principles of justice and tax cooperation. Thank you for your attention. Meegwetch. I’ll turn it over to Brigitte Alepin.
Brigitte Alepin, Tax Specialist and Tax Policy Advisor, Tax Professor, Université du Québec en Outaouais, as an individual: Good evening, honourable senators. I appear before you this evening to support the creation of the International Tax Justice and Cooperation Day.
As Senator Dalphond said, there are more than 200 world and international days, and none of them deal directly or indirectly with taxation. This is surprising, because all aspects of taxation are important and affect all members of our society. I find it incredible to realize that no international tax day exists. That surprises me, and I repeat it.
In a globalized world, strong tax cooperation is vital. Without it, we risk seeing our tax systems weakened under the pressure of unfair competition. While businesses can easily shift their profits to more lenient tax regimes, we’re facing a race to the bottom that jeopardizes the comprehensiveness and integrity of our public finances. In this respect, it’s regrettable that, in past negotiations on globalization, we didn’t address the issue of international tax competition and the need for tax cooperation. Both the international organizations and ourselves are trying to find ways of bringing this tax cooperation to a global level, for the benefit of all citizens, by establishing this day. As was mentioned, the International Tax Justice and Cooperation Day is about tax cooperation, which I mentioned, but it’s also about tax justice.
Tax fairness is imperative at a time when great fortunes, both corporate and personal, are accumulating at an alarming rate, while their tax contribution is decreasing. Tax justice is not simply an ethical principle, but a necessity to strengthen social equity and citizens’ confidence in their institutions.
Establishing the International Tax Justice and Cooperation Day is an important step towards raising our society’s awareness of these crucial issues. It provides an opportunity to keep the public informed and engaged in the discussions needed on a regular basis to improve our common tax rules, while promoting the exchange of ideas and the search for innovative solutions.
Canada is active and engaged in constructive discussions on a variety of issues, including taxation, at the United Nations, the OECD, the G7 and the G20. Our contributions are historically well received and recognized. Recently, we have seen significant progress on tax cooperation and justice, particularly under the umbrella of the OECD and the UN. Canada has been a strong supporter of those initiatives, and I’m proud of that. While our Canadian tax system isn’t without its critics — I’ve criticized it myself many times over the past 25 years — it reflects the key values of cooperation and justice. When you understand it well, you can see and feel those values in the tax system.
Based on that experience and those principles, Canada is perfectly positioned to lead this initiative at the United Nations and to advocate for the adoption of a resolution establishing the International Tax Justice and Cooperation Day, the first international tax day.
We already have allies in this process. Organizations such as the Ordre des comptables professionnels agréés du Québec and the International Consortium of Investigative Journalists strongly support this initiative. In addition, respected tax experts such as Pascal Saint-Amans, former director of the OECD’s Centre for Tax Policy and Administration, also expressed their support.
In closing, let me paraphrase Senator Dalphond. As parliamentarians, it’s our responsibility to ensure that all taxpayers, whether they are citizens or businesses, pay their fair share of taxes and that this not be a source of conflict that could create more deflagrations in an already troubled world. Canada must step up and rise to the challenge of a more just and peaceful world.
I therefore invite all of you to support this initiative, which I’m convinced will help build a fiscal future worthy of the next generations. Thank you.
The Chair: Thank you very much, Ms. Alepin. We’ll continue with our other guest, Ms. Latulippe.
Lyne Latulippe, Professor, Department of Taxation, School of Management, Université de Sherbrooke, as an individual: Good evening and thank you. I’m pleased to appear before you this evening to express my interest and support for this International Tax Justice and Cooperation Day. There was some reference to that in the previous comments, but cooperation has evolved over time in different ways. We are not yet at the point where cooperation is ideal, but it has evolved over time.
Since the establishment of national tax regimes in many countries in the early 20th century, cooperation has been discussed in some forms. Its objective was twofold, at the time, but still quite limited. On the one hand, it was to protect tax bases against avoidance and to prevent double taxation. That still allowed achievement of some forms of tax justice. This cooperation also had a limited form: the bilateral form. For many years, the international tax framework was based on two countries signing a bilateral tax treaty. The network now has more than 3,000 tax treaties, all based on a common model.
However, as the economy has globalized, the need for a somewhat greater cooperation has become crucial. For years, this lack of coordination led to the emergence of tax planning practices made possible because of the high mobility of capital, assets and even employees. Added to that was the dematerialization of the economy, which increased the possibilities of planning to transfer profits to a jurisdiction, which was favourable, without transferring economic activities. That really created a challenge to protect tax bases.
Due to a lack of tax cooperation, all of this essentially benefited, as was mentioned earlier, large corporations and wealthy individuals who could exploit those loopholes unfairly.
Since the beginning of the 2000s, we’ve made somewhat greater progress in terms of cooperation, thanks in particular to the actions undertaken by the OECD, which first proposed a framework for information sharing between countries to allow tax jurisdictions to access the tax information of its residents abroad. Countries were largely involved. They adhered to those principles and set up automatic information sharing, thereby putting an end to some form of bank secrecy, which was essential for tax avoidance.
Building on that success, the OECD launched its famous Base Erosion and Profit Shifting Project in 2012–2013. As a result, 15 actions were taken in 2015 to address some of the shortcomings of national tax systems. Efforts were made to try to close certain loopholes. There are still problems with current regimes. Despite the remedies provided by those 15 actions to which several countries agreed, some problems remained.
This brought cooperation to another level. It was mentioned earlier: A major reform starting in 2019 introduced a global minimum tax, on the one hand — countries signed on to it — and we’re seeing its implementation in many countries. Initially, this implementation will take place mainly in developed countries that have the resources to carry out this type of reform, but other countries will follow over time.
The second part of the 2019 proposal on a minimum tax also includes a reallocation of taxing rights to the market country, even if a company doesn’t have a physical presence there. The objective is to ensure adherence to a multilateral option such as this one, as well as the elimination of digital service taxes that, until now, had been the unilateral solution that had been otherwise prioritized in the absence of a multilateral agreement.
This proposal continues to present challenges. Cooperation isn’t always easy. Countries have different interests. We see it a little more clearly in this section. It’s a little more difficult for countries to come up with a text for a multilateral agreement, but things continue to evolve.
I should note that implementation of inclusive cooperation involving a large number of countries with divergent interests isn’t an easy task. The OECD has brought several countries to the table with its inclusive framework, but the work of the UN in helping to set up an open and inclusive forum is also worth highlighting.
Fifteen years ago, the idea of a global minimum tax seemed utopian because it was totally contrary to the fiscal sovereignty of countries. However, faced with the growing difficulty of taxing international taxpayers, states have realized that cooperation is the only way to ensure a minimum level of taxation, particularly for larger corporations. The progress made in taxing these multinationals is noteworthy, but there is still work to be done to improve tax justice, including targeting mid-sized businesses, digital companies and high-net-worth individuals in particular.
It’s essential to maintain and strengthen this emerging and growing international cooperation in order to create the conditions for tax justice. The establishment of an International Tax Justice and Cooperation Day underscores the importance of putting tax justice at the forefront and recognizes that the only way forward in this area is through international cooperation and not through tax competition among states.
That day would also serve as a reminder of the role that taxation can play and can be made to play, through cooperation, to achieve greater justice, among other things to tackle environmental challenges, by encouraging responsible behaviour and generating revenue to meet the costs of climate change. Again, tax justice is an issue and cooperation is key to creating a level playing field. By proposing the creation of this international day, Canada would reaffirm its commitment to tax cooperation and tax justice. It would show leadership on a fundamental issue for today’s societies. Thank you.
The Chair: Thank you very much for your passion. We’ve now reached question period. We’ll ask Senator Marshall, who is somewhat familiar with taxation, to begin.
[English]
Senator Marshall: I will address this question to all of you, but perhaps Senator Dalphond can answer it first.
When I read your bill, I remembered an article I had read in The Hill Times last week. I don’t know whether you read it. It’s entitled “Tax fairness for whom? Canadian negotiators present roadblocks in reforming global tax rules.” There is an indication there that there are terms of reference being developed by the United Nations in New York to work toward tax fairness. It says that 110 votes were in favour, there were 44 abstentions and 8 against. One of those “against” was Canada.
I was surprised when I saw that because it seemed like some of the initiatives that this group is supporting are along the same lines. When you hear Minister Freeland speak, it seems as though they’re on the same wavelength.
Were there any discussions with regard to the bill as to whether the government would support the bill? Could you even just provide any commentary as to whether you think that article contradicts your proposed bill? Could you just speak to that?
Senator Dalphond: Thank you, Senator Marshall, for the question.
No, I did not discuss the content of the bill with any minister or the Prime Minister. It’s really an initiative that I met with Professor Alepin. I did not meet with Professor Latulippe, but I see she’s as enthusiastic about it as Professor Alepin.
I believe we need more international cooperation. The Panama Papers, for me, were an eye-opener when we got all of these reports about these people from across Canada who are having their tax residence somewhere else and hiding a substantial part of their assets that should be taxed from the Canada Revenue Agency, or CRA.
What struck me was the difficulty for the CRA. It needs cooperation with other countries; otherwise, they can’t really get the information. They are limited to what they can get in Canada, and there must be leaks that are either illegal or unauthorized or leaks by sources that are well-informed in order to discover these types of things. I know the government has set up a special team at CRA to look at the Panama Papers to find out which Canadians are involved. I don’t know what happened there, but I suspect some made adjustments to their tax declarations and agreed to settle things instead of being sued. Maybe that’s the best thing to do.
I understand that cooperation is critical. Each country should not be a kind of oasis somewhere else where you can hide without any chance of getting relevant information.
Senator Marshall: I was struck by the article, and I was surprised that Canada wasn’t supporting the terms of reference. Could you read the article? Then, if you have any commentary on it, perhaps you can provide it to the clerk. When I read the draft bill, the first thing that came to mind was that article I had seen in The Hill Times.
You mentioned the Canada Revenue Agency. We’ve had them before the Finance Committee a number of times to testify. You referenced Senator Downe’s bill, Bill S-258, in your speech. The impression that’s being left by the Canada Revenue Agency — and I support Senator Downe’s bill — and it’s sort of implied in the bill that the Canada Revenue Agency is not really on top of making sure the existing rules are complied with. That’s one of the problems that we have. Do you have any comments on that?
The other thing I needed some clarification on — the final statement in your speech where you’re saying “in addition to the binding legal standards that are absolutely indispensable to ensure tax justice” — I think I know what you mean by that — you said “we also need to launch more symbolic initiatives that seek to promote greater awareness of public opinion.” Could you just clarify that?
Senator Dalphond: More awareness in the public opinion; it’s “more awareness in the public opinion.” A word was missing. It’s awareness in the public opinion that people realize the importance of everybody having to put their fair share of contributions into the social system.
Senator Marshall: Is “fair share” defined anywhere?
Senator Dalphond: It’s important that international cooperation comes along with a minimum tax, for example, or a way to tax some of these multinationals that have no hard assets in many countries. The taxation in 1922-23 was based on real property. We’re far away from that now.
That needs an intelligent response to it, and I don’t think one country can do it. All countries must work together to come up with a minimal framework. That’s what the OECD is trying to achieve, and I think this is what we want to remind Canadians of from time to time. This is something we have to explore and ask our government to be a full participant in.
Senator Marshall: I would like you to read that article because to me —
Senator Dalphond: I will tonight.
Senator Marshall: — it seems that the government’s position with regard to those terms of reference doesn’t support your bill is probably the best way to say it. Thank you.
[Translation]
Senator Forest: Thank you for your presentation. Thank you, Senator Dalphond, for tabling this bill. I think we are at a time when our social programs are increasingly important. When we look at the deficits that are exponential, there are certainly actions to be taken. One of the important elements is no doubt tax avoidance, and then, as you so aptly mentioned, the only way to put an end to it is through cooperation among all the international tax authorities.
My question is this: Are the Canadian legal system and the emphasis on individual rights partly responsible for Canada’s ineffectiveness in combatting tax havens?
Let me give you the example of the United States, which, since 2014, has forced foreign banks to disclose the accounts of all their U.S. customers abroad — an effective incentive that doesn’t exist in Canada.
Are we too lax with our tax laws in Canada?
Senator Dalphond: There’s a political angle to laxity, but I’ll let Professor Alepin, the international tax expert, speak.
Ms. Alepin: Yes, there’s a similar rule in Canada. It’s true that the so-called FATCA rules, the U.S. Foreign Account Tax Compliance Act, have been in place for some time. So the U.S. has a set of rules that require financial institutions to disclose information to the U.S. government. Internationally, with the OECD, a number of other countries, including Canada, have implemented similar rules based on those rules and have followed them. That explains why it’s often said that banking secrecy in Switzerland is practically non-existent today.
For our part, Canadians who do business with tax havens have signed this information disclosure agreement, and it’s practically impossible, today, to engage in tax avoidance by depositing money there without disclosing the resulting returns to Canadian tax authorities. That’s because the Canadian rules that were put in place are very similar to the American rules you mentioned.
Senator Forest: In your opinion, even if we have tools, are we using all the tools that could be available in the legislation to fight tax avoidance even more effectively? Because it seems that, from the outside, we’re getting results, but they’re not up to the level we’d like to see.
Ms. Alepin: I have to tell you that you’re talking to a long-standing critic of the Canadian tax system.
I’ve written books, like Ces riches qui ne paient pas d’impôts, so I’m a ready critic of the Canadian tax system.
There’s no doubt that the Canadian tax system has its critics and isn’t perfect, as is the case for all tax systems. But I think our tax system is very supportive of international tax reform. We can talk about rules to put an end to bank secrecy and obtain information from Canadians who commit tax avoidance in tax havens. We can also talk about the use of information from the various tax scandals that were brought to the attention of the Canada Revenue Agency.
I wouldn’t be here today if I thought Canada couldn’t pass this bill. I’d try to bring about that day through other means. Personally, I’d be happy to be Canada’s spokesperson for the establishment of that day.
Whether it was with respect to individual Canadians or multinationals, Canada was one of the first to support the OECD’s BEPS tax reform. We don’t see all the positive things that are happening, but much is being done. Obviously, more could be done.
For example, I firmly believe that tax measures for charities are not appropriate. Of course, there are things we could do, but it’s important to set up this day. Future generations must see the importance of fiscal cooperation and justice. If I look around the world, Canada is well positioned to do that.
[English]
Senator Smith: I have a question for Senator Dalphond and maybe your associates.
Your goal with the bill is that it become an internationally recognized day by the United Nations, or UN. In doing so, it would shed light into the world of tax cooperation and justice and ultimately be a catalyst for concrete multilateral initiatives that increase harmonization of tax laws and increase tax information sharing.
How confident are you that having this designated day could lead to concrete multilateral initiatives? Why hasn’t this day been stamped by the UN before now?
Senator Dalphond: Well, I think Ms. Alepin will complete my answer. But one country has to move it. In order to move it, it has to have recognized it. I’ll leave Ms. Alepin to complete the answer.
[Translation]
Ms. Alepin: I had the opportunity to discuss the implementation of the international day with Michael Lennard, head of the United Nations Committee of Experts on International Cooperation in Tax Matters.
It’s a good idea and it’s surprising. Personally, I’m surprised that no one previously thought of setting up that day. I think that we Canadians have good ideas; I think it’s a great idea and that it’s necessary to implement it.
For years, I’ve volunteered to bring about that day, because I’m a big believer in it and I think that we have a great team to set it up. We’re not perfect. If we scratch below the surface, we’ll uncover our fiscal imperfections, of course, but I think we’re very well positioned internationally to advocate for the creation of that day.
We have long shown our support for tax initiatives at the OECD. You know that right now the UN is joining the international discussion. In addition to Canada, some developing countries support UN initiatives, while others are unsure about where they stand in terms of supporting both the OECD and the UN.
We’re in a period of adaptation and development, in which a second major organization is entering into the field of international tax cooperation, and Canada has a real place. I was taking the opportunity to answer the honourable senator’s question earlier.
The Chair: Ms. Latulippe, would you like to add a comment?
Ms. Latulippe: In fact, I agree that, on the one hand, we have to get the ball rolling and that, on the other hand, it’s strange that there still isn’t an International Tax Justice and Cooperation Day. So we need to talk about that.
If we wait for the perfect country that’s done nothing wrong to do it, there won’t be one, because no country has a perfect tax system that can claim it is totally representative of fiscal justice.
I agree with what Brigitte Alepin was saying. The tax system isn’t perfect, and there are some complicated aspects to corporate taxation that still allow for some planning. If the rule is there, companies can’t be blamed for taking advantage of it. Some things aren’t perfect, but at the same time, each country has the choice of competing or cooperating.
We think that if we don’t raise cooperation to a certain level, everyone will prefer to compete even if, at the end of the day, everyone may lose. We need to get that cooperation.
The day we sit down together and agree to cooperate, the solution won’t come easily. The OECD worked hard for years, but it was criticized for representing developed countries. More than 140 countries gathered around the table, but some less developed countries felt somewhat left out of the discussions. That’s why the UN took up the idea. So there’s a willingness to cooperate. However, despite this desire, the solution won’t come easily.
We need to give cooperation time to become effective, and I believe that it’s by nurturing cooperation that we’ll eventually find solutions that meet everyone’s interests.
[English]
Senator MacAdam: I have a couple of questions and everyone on the panel can join in and answer.
The first thing is: How do you define tax justice? It struck me that there isn’t a definition in the bill. Do you think the bill needs one?
Senator Dalphond: Tax justice, I guess, has to be a term that will have to be defined by the international fora, so what is fair taxation and the fair level of sharing among the countries. The purpose of this bill is not to try to define what should be the content of international cooperation. It’s just to signal that we need international cooperation and that we have to find ways that — this is the only way to bring more tax justice and tax fairness, if we do cooperate.
I read The Hill Times, Senator Marshall, and I think that convinced me that we need a tax day to force the government to explain its behaviour. I understand that those who wrote this op-ed are saying, that they’re very surprised by the government officials’ attitude, and I think it shows that we still have to debate that issue and make it clear that they should be part of it and not on the sidelines.
So yes, I’m critical of the officials that they vote against.
Senator Marshall: No need to do a written response.
Senator MacAdam: You took some of my time.
Senator Dalphond: I was going to say, to be fair, I assumed the chair would give you one more minute.
Senator MacAdam: I’m good. That’s fine.
Do any of the other panellists want to weigh in on that? I get international tax cooperation; I get that. It’s the word “tax fairness.” Even when I Google it, I get so many definitions of “tax fairness,” so I wanted to open up a discussion on that. Some people think it’s more tax for the wealthy. There are different views on tax fairness, so I would value your opinion or insights on that.
[Translation]
Ms. Alepin: The question is really relevant and I like the way Senator Dalphond answered it. I see you as a great lawyer.
The Chair: He’s more of a politician now, I’d say.
Ms. Alepin: I asked myself the question — and I think the honourable senator did as well — when the bill was drafted. I don’t think it would be appropriate, as Senator Dalphond says, to write a definition. It depends on countries and citizens’ values. I was thinking that we might simply say that we would like a tax contribution equal to the ability to pay. That’s a somewhat recognized principle. The purpose of this day isn’t to propose a definition as such; it’s to say that, without tax justice, regardless of the definition various countries give it, taxpayers won’t support it. If we look at history, the French Revolution and the Boston Tea Party, as soon as taxpayers feel that the system isn’t fair, they no longer support it. We see strong reactions, which can lead to bloody wars, and taxation often represents the most important expenditure in a personal budget. I don’t think the bill is the place to put a definition. I understand the question and I think that if we’re going to set up an international day to highlight taxation, both tax cooperation and tax justice must be there. To bring together Canadian and international stakeholders regarding that day.
[English]
Senator MacAdam: The Chartered Professional Accountants of Canada, or CPA Canada, with which you’re familiar, has been calling for a comprehensive tax review here in Canada. According to the CPA Canada, many of Canada’s international peers have undertaken comprehensive reforms or full-scale reviews of their tax systems.
What do you think the implications are for Canada not undertaking a tax review while its peers are moving forward comprehensively? Would a review of the tax system place us in a better position to collaborate internationally?
Senator Dalphond: I believe you’re always in a better position when leading the pack than when you’re an outlier. The taxation system is complex and also based on certain ideas that have been changed by the fact that assets are no longer assets in the traditional way. So we have to adapt that. A comprehensive review of our tax system would certainly be a welcome modernization of them because I think we do in the tax system what we do in the criminal law: piecemeal adjustments every year.
But I don’t know if we still have a general framework that is guiding all these changes. You will know better than me because you are a better expert on that. But I certainly appreciate the comments of CPA Canada that it’s something that should be done. It might be something we would be forced to do if somebody else is doing a major reform south of the border.
Senator MacAdam: Do the other panellists have a comment?
Ms. Alepin: Just to be sure of your question: You think CPA Canada is proposing a deep review, is that what you’re referring to?
Senator MacAdam: Are they proposing a tax review?
Ms. Alepin: Not only CPA Canada but a few organizations.
Yes, I think I agree with this. When we talk about taxation of charities or even taxation of small- and medium-sized businesses, there are a few specialized topics in taxation in Canada that I think we should not do patchwork; we should go deep, think about everything and try to come up with something adapted to the 21st century.
If the question is whether I agree with CPA Canada, the answer is, of course, yes.
Senator MacAdam: And do you think it would help as far as international cooperation is concerned if we are doing a comprehensive review of our tax system while others are also doing that? Would it lead to more cooperation?
[Translation]
Ms. Alepin: I believe it would; I think about this a lot and I had not thought about it that way, and I appreciate your making this point. I think it would be a good idea to support this effort and propose this day and say we are preparing to do a deep review of our tax system. I hope that answers your question.
[English]
Senator Kingston: Thank you for being here.
I’m wondering about — and I’m taking this from Senator Dalphond’s speech. It speaks to the fact that, in 2019, the OECD proposed rules for the establishment of a global minimum tax on corporate profits. In July 2021, 130 countries agreed on the standard, which should come into force by 2024.
I’m intrigued by how that has taken so long. I would like the three of you to comment on that process.
You’re talking about having an impact in terms of this bill internationally, but could you talk to us about this process and why, even from 2021, when 130 countries actually agreed, it only comes into force now? Also, what does “in force” mean, to Senator MacAdam’s questions about fair tax?
Senator Dalphond: I’ll leave Ms. Alepin to explain, but the signing is one thing; the ratification is the formal adherence to it. Only 40 or so countries have ratified so far. I don’t think they’ve yet met the minimum number that makes it a formal treaty.
Senator Kingston: What is the minimum number?
Senator Dalphond: I don’t know. I think it’s 75; I don’t know what the number is but it is far more than 40.
Senator Kingston: Why do you think coming in force in 2024 — a minimum number is one thing, but 2024 is almost over. What do you mean, exactly, by “in force”?
Senator Dalphond: In the United Nations treaty context, there are lines, but sometimes when you’re getting close to the deadline, you can stop the clock for a while and make sure that you get the number of proper ratifications. Maybe somebody can check what exactly the number is. Maybe Mr. Aiyer can check for me — or somebody can check — what number of ratifications are required for the treaty to come into effect.
Senator Kingston: Is everyone satisfied with the 130 number? Is 130 a good number of countries to have agreed at this point? Are you expecting more?
[Translation]
Ms. Alepin: It came into force in Canada in 2024. Ms. Latulippe, the Honourable Louise Otis and I organized a conference in 2015 called TaxCOOP where we proposed a minimum tax because we thought it made no sense, given tax competition and the fact that multinationals are paying less and less tax. In 2015, we would never have thought that a global minimum tax would be agreed to by more than 130 countries. Never. When we talked about it, we sounded like we were dreaming, because it was unthinkable in the realm of taxation.
You are wondering why it is taking so long. My own impression is that it was not only fast, it was unbelievable. I am sure that colleagues on the committee are also a bit surprised by the fact that these countries agreed to implement a global minimum tax and the fact that Canada put it in place in 2024. It is one of the first wave of countries that really want to put it in place. It is already in place, not just the global minimum tax but also the tax on digital services. I know my colleague Ms. Latulippe has done a lot of work on this subject.
Ms. Latulippe: I am somewhat of the same opinion. I think it was actually pretty fast, having seen the first plan. The idea was put out there in 2019, as two sentences in a press release. In 2021, we had maybe three or four paragraphs and we were in agreement on the principles. This was the two-pillar reform: the minimum tax but also the other component for the big digital businesses. We had these two components, and there were several paragraphs in 2021 saying that the countries agreed on the principle, but next they had to be drafted. The only way for the OECD to coordinate everything in the most coherent way possible, because the global minimum tax had to be incorporated into each country’s national legislation, was to have model rules. They started from zero and developed a whole new system of taxation that is completely different from what was there before.
Some rather unique rules still had to be instituted. They developed all this by negotiating. Once the rules were published, in 2022, they were fine-tuned; the countries agreed on this formulation in 2023 and each country had to proceed by way of a legislative process. All of this explains the delays and where we are in Canada and in nearly 40 countries where the legislation is in force. The first year that the minimum tax is to be collected will be the 2024 taxation year, when the corporations file their tax returns in a few months.
The Chair: Thank you.
[English]
Senator Kingston: — we don’t see. The work continues.
Senator Dalphond: One little thing: I said it was a treaty. It is not a treaty. It is a kind of basic framework suggesting how to implement it. They don’t need ratifications. In fact, I should have said in the speech that 40 countries or so have implemented that framework and draft legislation. They don’t need the signatures. Countries are moving forward in implementing it.
Senator Ross: Obviously, tax cooperation is a positive thing when we’re looking to avoid criminal tax avoidance, that sort of thing. I heard the term “loophole” used earlier. I know small businesses are often concerned about the idea of tax strategies being identified as loopholes. Obviously, nobody wants to see people putting money elsewhere to avoid the proper taxation.
Something in Canada I think everybody knows we have, and have to have, is taxation. I wonder about having a day to celebrate taxation. What do you think the response to that will be from the public? How do you plan to promote or market it?
Senator Dalphond: That’s a very good question. If I say we’re going to promote the fact I pay 50% in tax before the other tax I pay when I buy something, and the local tax, real estate tax and school board tax. No, it won’t be popular. It’s not what we want to do.
The point we want to make is taxation is essential to the proper functioning of our society. There is no magic in it. You can borrow all the time, but it doesn’t work. You have to collect taxes in order to run the government. This is the first point.
The second point is this taxation should be fair to everybody, including those who have more means to escape part of that fiscal weight that otherwise you will have to pay. Myself, I cannot evade it. Everything I get is taxed at source. The fairness is those who are not in the same situation as me should also pay their fair share of it. That’s part of the marketing or message that will be given.
The other part of the message is you cannot achieve tax fairness or a fair distribution of the burden on everybody if you don’t have international cooperation that prevents people who want to evade paying their fair share of things to go somewhere else and hide. That’s where these two things are not dissociated. They are part of the same spectrum.
If we leave people going away, and that’s what we understood in 1922 when they started to think about that; they said, well, we’re talking about Europe, rebuilding Europe. People were moving the money outside so they would not be taxed because the tax on wealth at one point after the First World War was very high. In some countries, they went up to 70% or 80% on a wealth tax. People were trying to find ways to avoid that. That was the cost to rebuild Europe.
All these things are linked. People have to understand that it’s frustrating to pay taxes, but it’s not that frustrating if you get some services and good money for it. It’s also frustrating if you pay your 53%, 49%, 40%, 25% or whatever bracket you are in. You see other people are not paying the minimum income. They don’t pay the minimum things. They pay outside because they can avoid it. I think this is where the fairness comes in.
Senator Ross: It is going to be a task to market it, for sure.
[Translation]
Ms. Alepin: That is a very interesting question. I made a film on taxation and I won a Gémeaux for the film, which has been shown in 20 countries. It is probably one of the best-known films on taxation. The producer of the film, and the director, who has made films with Martin Scorsese, wondered how to make a movie about taxation that didn’t have “taxation” in the title. I understand your question, but I think that today, the generation that is behind us, nudging us, does not share this aversion to taxation. They are calling for fair and reasonable taxation. The most read items in newspapers and the media are increasingly articles that deal with fair taxation and unfair taxation. People are interested in knowing where we stand with our tax policy. Celebrating an international tax justice and cooperation day shows that innovation is happening. People are not afraid to tell it like it is and they want to address generational concerns: the concerns of our generation and the generations that follow.
[English]
Senator Ross: What is the response you’ve had from the corporate community who are probably the most affected by these types of cooperative regulations?
[Translation]
Ms. Alepin: There are many things I could say; you really must be feeling the passion that my colleague and Senator Dalphond and I feel. I started making Le prix à payer in 2011. When I talked about tax fairness or tax cooperation in 2011, the business world did react. The business world includes vice-presidents of finance, comptrollers and tax lawyers working in multinationals, and they need to have a stable and secure tax system with clear tax rules. So they need something that is fair and an international tax system that cooperates so that multinationals have a clear understanding of the tax rules in their 50 subsidiaries across the countries in issue.
We are increasingly seeing this at international tax conferences, where the leading tax thinkers, whether in the corporate or trade union world or in other spheres, say that we have got to agree on tax policy and we have got to design tax rules that will stand up. Income taxes are what fills a country’s coffers. Inevitably, there must be cooperation and tax fairness in order to achieve this.
The Chair: Thank you.
[English]
Senator Pate: Senator Dalphond, when you gave your sponsor’s speech, you talked about the effects of tax competition between countries, and I think I’m quoting accurately when I say:
. . . when fewer financial resources are collected to invest in our public and social services or in supporting our society when it comes to climate change . . . .
I’m interested, as you know, in some of the policy measures related to social support services especially for those most marginalized, things like pharmacare and guaranteed livable income. I’m curious not just for you, but especially for the experts here. When you’re looking at these proposals, the usual question that you’re already hearing from my colleagues, and I’m sure from parliamentarians and the public is: How much is it going to cost? I’m always struck by how less likely those questions are asked when we talk about tax cuts or preferential tax treatment to support businesses like corporate welfare and those sorts of things.
I’m curious as to whether there are best practices you would recommend in order to provide this information. I think you started into it, Professor Alepin, a minute ago. It reminds me that just recently I had a conversation with a family — parents who were my age, young person who was my kid’s age, who was working in Scandinavia — and the parents were complaining about all the taxes he’s paying, but he quickly talked about all the benefits he receives in terms of social, health and potential education benefits for his kids.
I’m curious as to what you see in terms of best practices for encouraging the kind of transparency you’re talking about, how you would assess the impacts of tax justice, not just for parliamentarians, but how you get that out to Canadians. Your mentioning of the film made me think of this. I’m curious what you think are some of the best practices and what recommendations you would have. As we’ve just seen in the election to the south, how you get the information out to citizens is really important.
[Translation]
Ms. Alepin: If I understand the questions correctly, we are talking about best practices, how to get information to the public about the value of tax justice.
Best practices in the realm of taxation means having a tax system that is as fair as possible, because that gives taxpayers confidence in the system. I am not just saying that here because I am trying to persuade you about this International Tax Justice and Cooperation Day; I also say it to my students, because I think this is really the most important value. Promoting international tax justice and cooperation is certainly why we made a documentary called Fast and Dangerous Race to the Bottom in English and Rapide et dangereuse : une course fiscale vers l’abîme in French, to raise people’s awareness of the importance of tax cooperation in a globalized world.
Think about it: We went global and brought in all the countries engaged in tax competition among themselves to attract the multinationals, but throughout all the rounds of negotiations, there was never any mention of international tax competition and cooperation. Today, you and I are discussing what should probably have been addressed 30 years ago, and I am not the only one who thinks that; the thinkers who speak in the film I referred to earlier say so as well.
I think that to promote tax justice, it takes a variety of information, work by the international institutions, work by Canadians, and the work being done here today to discuss our desire to promote that day. It can go a long way. I have even written a novel that was published this year, the first novel about tax justice in the history of French literature.
I hope I have answered your question. I was not prepared for it, I really just wanted to talk about the international day. Ms. Latulippe may have something to add.
Ms. Latulippe: Yes. A few things came to mind when you asked your question. There are a lot of things that are important to me.
First, tax competition among countries is unfortunate, because competitiveness is not a basic principle in tax policy. Neutrality and fairness are. Competitiveness has instead become a basic principle and has even pushed the other principles aside, particularly when it comes to corporate taxation and the activities of corporations that might operate internationally. So tax competition has been elevated. I understand and appreciate that perfectly well: A country has to be competitive, with a competitive economy and competitive industries, that is what we want. But if we talk about a competitive tax system, that leads to exactly one thing: lower taxes for corporations, particularly for large mobile ones. Yes, competitiveness has to be taken into account in designing a tax policy, but that should not be done at the expense of all the other basic principles that inform a good tax decision.
I think tax justice is a somewhat more obscure concept. Competitiveness is fairly easy — it comes down to reducing rates; tax justice is a bit more nuanced and difficult to address. When a tax policy is developed, it may be a bit more nuanced and that makes it more difficult to give a precise answer, because it is more difficult to use, and that means we sometimes fall back on competitiveness.
I also think that if we want to include everyone in the discussion about tax justice, there has to be some form of transparency. Tax matters are very opaque and it is very hard to get tax information, and the statistics are often difficult to get hold of. There has to be some form of transparency, however, so that people feel involved and understand the situations that are problematic.
The Chair: Thank you.
Senator Loffreda: Thanks to all our panellists for being here this evening.
First, Senator Dalphond, thank you for introducing this bill. I believe firmly in tax justice; it is very important. I will have a question for you later, if time permits. I would first like to start with a question for Ms. Alepin and maybe Ms. Latulippe, if they can answer it.
Ms. Alepin, you said that you are very critical, or rather that it is easy to criticize the Canadian tax system. You said that when people think the system is not fair, they stop supporting it.
You also mentioned the race to the bottom, but I can tell you that in Canada, we are not in a race to the bottom when it comes to tax policy. I believe the maximum is 53% or 54%. We have productivity and competition problems. After a certain point, our businesses have a tax bracket that is among the highest in the world. It is often forgotten that wealth is always created by entrepreneurs. I recall the discussions I recently had with our analysts in the credit department at the bank. I told them that an entrepreneur can lose everything at any moment. When we talk about tax justice, I can tell you that 99.9% of entrepreneurs are honest people who work hard and if there are tax strategies to adopt, they adopt them, and that is entirely appropriate, because they are going to reinvest in their business and create jobs and wealth for everyone. That is something very important that should not be forgotten.
I have not seen your film, but I would very much like to see it. I have not read your books; we will be talking about them later, but I would like to read them. I have read Tony Blair’s book, however. He is taxed at a rate of 55%. After a certain time, he saw that his revenue from income tax was declining. He decided he was going to lower the tax rate to 50%. We are a social democracy and when I say we live well in Canada, it’s because that is entirely true.
Much has been said about tax evasion in connection with the International Tax Justice and Cooperation Day, which is very important. However, do you think that if we lower the tax in Canada, there will be less tax evasion? A majority of entrepreneurs do not engage in tax evasion. I can tell you that a majority of entrepreneurs pay a lot of tax to keep Canada as it is. I firmly believe that, and I would take up arms for them, because I have seen it over the course of my 35 years in banking. Could we attract more investment by lowering taxes, instead of always talking about the “race to the top”? I think we are in a “race to the top” and not a “race to the bottom” in Canada. That is my question.
Ms. Alepin: That is a very good question. I am trained as an accountant.
Senator Loffreda: As am I.
Ms. Alepin: And as are others who sit on this committee. So I am very happy. I have also seen entrepreneurs and I am the daughter of an entrepreneur, with a small family business. I have heard about it all my life and I have enormous admiration for entrepreneurs. I think their way of life can only be understood by other entrepreneurs. They don’t just have to pay the mortgage, they have to pay all their employees’ mortgages as well.
I agree with you 100% that we have to have a tax system that meets social needs, the need for justice, the needs of entrepreneurs, and so on.
You said you believe that we are not in a “race to the bottom” in Canada. I think we are in a “race to the bottom,” in a way, for certain types of taxpayers. Maybe not a race to the bottom, but tax rates are falling. I will give you an example. It is true that the highest rates for taxpayers in Quebec is 53.31%. Effective tax rates are 30%, 28%, 29%, and they decline gradually by 1% each year. I am talking about effective tax rates. For some types of taxpayers, for example the ones who can play with international tax competition, they are not being overtaxed. We really are playing a game of international tax competition and taxpayers are able to navigate the international system to get their tax rate down.
You and I and everyone else who can’t do that feel that tax policy is very rigid and very hungry, because the coffers have to be kept full. It is not just us; every country on Earth is trying to adapt to globalization and adapt their tax systems to globalization. We are trying to maintain a balance between tax competition and cooperation, the right balance. We are trying to bring about tax fairness while making sure that our local entrepreneurs are not suffering in this situation. Everyone on Earth who is talking about this right now is having to deal with the need to modernize their tax systems and adapt them to globalization.
I think creating this day is just one step. As was said, people wonder how it is that this does not already exist. And that is what we are working on today.
Senator Forest: We are talking about International Tax Justice Day. Our income tax system goes back to 1917. It was a temporary tax system. It has been added onto considerably, to the point that it has become a bit of a shambles. To give a general picture, there was the Carter Commission in the late 1960s. I believe a tax system should be efficient, fair and competitive, so as not to lose our businesses and our brains. In addition to the Canadian tax system, we have provincial and municipal taxation. We are talking about entrepreneurs, but we are also talking about individuals, as you said, who do not have the skills to make their way among the various regulations and who have to pay property taxes and sales taxes.
Do you not think it should be tax modernization day? Should we not be re-evaluating our entire tax system? If we look at the question clearly, we see the results of numerous measures that have been adopted by the Canada Revenue Agency over the years.
Senator Dalphond: I will venture to respond. The question is important, but our goal is not to say “Look, we have to reform the Canadian tax system.” Rather, our vision is to say that no matter what reform the Canadian system undertakes, it must be understood that it has to be done within a larger, international context, by participating in an international cooperation exercise that will enable the system to be put in place, which will comply with the major international principles, to be effective.
However, we can’t put in place a system that will run counter to the major general principles recommended by the OECD or that the 30 or 40 countries that are our main trading partners decide to put in place but we don’t. The international dimension must not be forgotten in all this. In one sense, the globalization of markets and the economy and the dematerialization of the economy mean that we have to put in place a tax system that reflects certain general principles. It means that when one party wants to impose a measure, it will also be imposed elsewhere and corporations will know about it. That way, we get our share of the taxes and will not be doing something that means we end up with nothing, while another country next door gets all the taxes but charges almost nothing, and that country makes off with a lot of money because it receives all the taxes.
And that is what the OECD rules are trying to change. The United Nations tried to get a convention signed, not guidelines or suggestions that countries do things. It is going to be important. When I read the United Nations site, I understood that there is a conflict between the developed countries, the emerging countries and the south. Canada wants to abide by the OECD principles, but it is less prepared to adhere to the principles of the United Nations General Assembly, which are different. Some way of harmonizing this needs to be found. The OECD may be a club of the most select countries, but the United Nations is the planet as a whole in a different context. I think Canada has to be active in both places.
[English]
Senator Smith: You discussed the need for symbolic initiatives in addition to binding legal standards to increase awareness and urgency around tax justice issues. How would this symbolic day interact with existing multilateral efforts like those of the Group of 20, or G20, and OECD to support both legally binding and voluntary tax reform?
Senator Dalphond: That’s a very good question. These discussions at the OECD level, even at the United Nations General Assembly, are among a select group, and most Canadians are not aware they’re going on. The purpose of an international tax day to speak about international tax fairness and the need for international cooperation is to say it doesn’t belong only to the people who go to Paris at the OECD and spend two weeks there to negotiate things and discuss things. It concerns you. It’s going to affect you. It’s going to affect what your country will collect, and it’s going to affect what type of services you will receive.
Also, we need cooperation because if we have better cooperation and we collect more money on the international level, that should relieve Canadians of the tax burden accordingly. Otherwise, if you don’t tap where there’s more money, you have to tap where there’s less money. I think all Canadians should understand that if there’s more fairness and more collection at the international level, there will be less need to collect more here.
I think all of that is not remote on a foreign planet. It’s something that affects us in our daily lives and the ability of our governments to provide services. I think this is important for people to understand that all these things are important, and they push for it and they understand that it’s necessary. I hope that answers your question.
[Translation]
Senator Loffreda: I have just one question to continue the discussion. I thank you for being here, too. I disagree with what you said; I am going to cite the sources, and I will do that in English —
[English]
It is because it’s from the Fraser Institute. I apologize. Usually when I am passionate I speak in Italian. I’m doing it in English now, my third language.
Canada’s tax rates are among the highest globally, particularly concerning personal income taxes. In 2022, Canada had the fifth-highest combined top statutory marginal income tax rate among 38 OECD countries, at 53.5%. I said we have a race to the top. You said a race to the bottom. I would just like to know your sources, where you get the race to the bottom.
The other thing, defending the entrepreneurs once again, every morning they wake up, they can lose everything they own. You have to have a risk return somewhere. The more you tax, the less the incentive.
Would you agree in Canada that the distribution of tax payments is notably progressive? We are a social democracy. The top 20% of income earners contribute more than half of all taxes collected. Specifically, this group earns approximately 49.1% of the nation’s income but pays out 55.9% of total taxes.
Here’s where I get to your point: In contrast, the bottom 20% of income earners receive 4.1% of total income and contribute 1.8% of all taxes.
I think it’s correct where you’re saying race to the bottom, but for the proper population. I’ve always said, return on labour has been here, the return on capital has been up here. We have to lower that wealth gap. Would you agree that we have a proper tax system, a progressive tax system for a social democracy?
[Translation]
Ms. Alepin: Yes, the Canadian tax system is a progressive tax system. That is clear and it is what I teach my students. The same is true of corporate taxes: Our taxes are to some extent progressive, because small businesses are taxed at a lower rate when they have revenue under $500,000, and they are taxed at a higher rate when their revenue —
Senator Loffreda: Should it be set at $1 million?
Ms. Alepin: Yes, that might be something else to look at. When you talk about 53%, that is the statutory tax rate in the act, not the one that is actually paid. When we look at your sources, these are tax statistics from the Canadian government. I would be happy to send them to you.
Senator Loffreda: Yes, I would like to see them.
Ms. Alepin: They are on my social media as well, because I often like to talk about them. I would not say it is a race to the bottom, because it is going fast; it is plummeting. So it is not a race to the bottom, but those are effective tax rates, not statutory. The statutory rate, in the act, 53.3%, is among the highest rates. Your figure is entirely true, but for effective tax rates. The reality is that the very wealthy have an effective tax rate that has been falling over the years. That is how it stands right now. That is the reality. I will send you the statistics. We do have a progressive tax system in Canada.
Senator Loffreda: We have a productivity and competitiveness problem. The problem we have in Canada is that a majority of businesses earn around $500,000 and when their revenue exceeds that amount, the tax rate is higher. When we look at the distribution of these businesses, it is not equal. There are some up at the top, just under the $500,000, and if we raise that level to $1 million, I think investments in Canada will be much higher and productivity will improve.
[English]
Money follows where it could reinvest. It follows tax.
[Translation]
We have seen this in the southern United States: they have won out strictly by their economic program, nothing else.
Ms. Alepin: You know, when my father was in business in 1985, the $500,000, the figure was set at $200,000. The figure has risen.
Senator Loffreda: Yes. When I worked in accounting firms, it was $200,000.
Ms. Alepin: Now, it has to go up again, because it has been $500,000 for a long time. I agree with you.
Senator Loffreda: Yes, we agree on something; there we are.
Ms. Alepin: We agree on a lot of things, senator. It has to go up.
Senator Dalphond: You understand that Prof. Alepin and Prof. Latulippe are big fans of taxation. If you listened to Franco Nuovo’s program on the weekend, on Radio-Canada, you would sometimes hear Ms. Alepin talking about taxation on Sunday morning. That is how I discovered her, by listening to that program one Sunday morning in bed, when they were talking about taxation. It is possible to make taxation interesting.
The Chair: You don’t listen to Tout le monde en parle, it would seem.
Senator Dalphond: No, not always.
[English]
Senator Pate: I just have one question. Senator Dalphond, who is not supporting this?
Senator Dalphond: Against the OECD?
Senator Pate: Who is not supporting the tax fairness ideas?
Senator Dalphond: I think there is more and more awareness about this issue. We are 100 years after the first conference, but progress is already there. I think the debate is not raging at the United Nations on that issue, so I think all the countries at the UN are involved in it. So this is quite important. Who is against this?
I don’t see any country being opposed to getting their fair share of taxation — because a company is operating from some kind of services from a foreign country that the country should not get a part of that taxation or the services that are provided in their country.
This is why I think all the countries in the world are trying to achieve a uniform base minimum that will be shared among all the countries. Will that leave each country to have more than the minimum? That’s another issue, but at least the race to the bottom will be fixed.
If I look at these electronic services, it was 15% that was the minimum that was agreed upon. At least everybody would get 15%. That would not prevent a country from having 25%, but it will certainly make it less competitive at 25% than at 15%. So there will be a balance between that minimum and how far you can go.
I still believe we should bring as much money as we can because we are providing services. Many enterprises do business here, and they should pay tax and not be overburdened by taxation — I agree with Senator Loffreda. We have to create wealth if we want to share it, but we also have to make sure that the wealth created here is not imposed somewhere else.
The Chair: In conclusion, I’ll give my question to Senator Marshall.
Senator Marshall: It’s not really a question. It’s more in response to the issue that Senator Pate just raised. I mentioned at the beginning of this session about Canada providing a roadblock. They’re trying to come up with terms of reference for this global taxation. There were eight countries that wouldn’t support it, and they were Australia, Canada, Israel, Japan, New Zealand, the Republic of Korea, the United Kingdom of Great Britain and Northern Ireland and the United States of America.
[Translation]
Ms. Alepin: As Senator Dalphond explained, it must be understood that up to a few years ago, the OECD was the leader in global tax reform.
I often went to the UN to say that it should be the UN doing this work. Now, the UN is involved in this initiative to provide more representation for developing countries.
I have discussions with Canada about this because Canada and other countries, such as the United States, have trouble taking a position on what must be done, because the rules conflict on certain points. I don’t see why Canada would not support the UN, but it is trying to see where to stand with respect to the global tax reforms proposed by the two organizations.
What I understand from all this, as Senator Dalphond so nicely and, I think, astutely, put it, is that it all goes to show that we need more international tax cooperation. It all goes to show the importance of international tax cooperation.
[English]
Senator Marshall: The only point I’d like to make is that there’s an article that’s out there for public consumption that says that Canada was one of only eight countries — the eight that I just listed — that voted against the final terms of reference for the UN process on this tax fairness.
I don’t know how that affects your bill. I’m just pointing it out. I said at the beginning that you should probably read it and see if it affects your bill.
I just found it curious because Canada does have a progressive tax system, and that’s what it seemed like the terms of reference would support, but I haven’t seen the terms of reference.
If the Americans aren’t supporting it, I think that’s an issue.
Senator Dalphond: I read the things on the United Nations and I’m trying to follow that a bit. The terms of reference are the subject of the discussions now. The vote was not about the content of the treaty. There is an agreement that we shall have a treaty. It’s about the terms of reference of the committee that was going to draft the treaty.
From the very beginning of these negotiations, Canada, Australia and New Zealand have been speaking together. Often, Canada was speaking on behalf of Australia and New Zealand, too. They are working, but if you look at the United Nations website, they say there seems to be a different approach between the OECD approach and the approach they want to define through the terms of reference where there is some infighting.
Senator Marshall: It raises a flag, and we should be aware of it and keep an eye on it.
Senator Dalphond: It doesn’t mean the bill is not necessary and that Canada is opposed to it.
[Translation]
Senator Loffreda: First, thanks again for this International Tax Justice and Cooperation Day. As I said earlier, I am a firm believer in tax justice.
You did a very good job of addressing the subject in your speech at second reading, and I quote:
International tax cooperation can also help countries better administer their tax systems by exchanging and sharing tax methods, systems and knowledge, particularly under the aegis of the OECD, which has several reports on this subject.
Based on your research, is Canada regarded by its international counterparts as being a good collaborator and partner when it comes to international tax cooperation? Because we spoke with Senator Marshall about this whole problem, and I think it’s a question I would like to ask you.
Are there flaws in our approach or places where we could improve? And last, is our road map sufficiently impressive for us to be the first country to adopt this kind of commemorative day?
Senator Dalphond: So I will conclude on that question after two hours of questions and answers —
The Chair: In fact, if I had had to ask a question, that would have been my first question.
Senator Loffreda: It is the last, Mr. Chair.
Senator Dalphond: I think I will be able to answer you.
I was in Paris two years ago and I went to the OECD with the Canadian ambassador. I was not alone; there were quite a few of us parliamentarians, because it was a delegation of MPs and senators. From what we saw, the OECD really is quite an impressive building, a converted chateau. A lot of research is done there and the research is very impressive too. We were told that Canada was an active participant and that the ambassador was very pleased with Canada and our active participation in OECD debates.
Senator Loffreda: Thank you.
The Chair: That concludes our business. I want to thank our witnesses, Ms. Latulippe, Ms. Alepin and Senator Dalphond.
Our next meeting will be on November 19 at 9:00 a.m. I would like to thank everyone before ending this meeting. It has been a rather exciting evening. Thank you.
(The committee adjourned.)