Mr. Speaker, I am honoured to add my voice in support of today's important debate on the 2013 income tax convention implementation bill, Bill S-17, another step toward lower taxes for all Canadians.
Today, on tax freedom day, I would like to place Bill S-17 into the larger context. Over the years, our Conservative government has really devoted considerable effort to keeping taxes low for Canadian families and small business. Indeed, since 2006, we have cut taxes over 150 times, reducing the overall tax burden to its lowest level in 50 years. We have cut taxes in every way government collects them—personal taxes, consumption taxes, business taxes, excise taxes and much more. We cut the lowest personal income tax rate to 15%, increased the amount Canadians can earn without paying tax, introduced pension income splitting for seniors, which was certainly well received by seniors in this country, and reduced the GST from 7% to 6% to 5%, putting an estimated $1,000 back in the pockets of an average family.
Clearly, we believe that Canadian families should keep their hard-earned money. They know better what to do with it than does government.
We introduced and enhanced the working income tax benefit. We introduced the tax-free savings account, the most important personal savings vehicle since RRSPs. We increased the age credit amount by $2,000. We doubled the pension income credit to $2,000. We increased the amount recipients of the guaranteed income supplement, the GIS, can earn through employment, without any reduction in GIS benefits, from $500 to $3,500. Finally, we increased the age limit for RRSP to RRIF conversion to 71 years of age from 69.
Our strong record of tax relief has meant savings for a typical family of four of over $3,200 annually. Not only that, but this action has resulted in over one million low-income Canadians being removed from the tax rolls.
However, the good news does not end there. Our government has introduced a number of tax relieving measures for small business. After all, our Conservative government recognizes the vital role small business plays in the economy and job creation. That is why we are committed to helping them grow and succeed. Over 90% of business in Canada is small business.
Indeed, since 2006, our government has taken significant action to support small businesses, including reducing the small business tax rate from 12% to 11%; increasing the small business limit to $500,000; and eliminating the corporate surtax for all corporations in 2008, which was particularly beneficial to small business corporations, as the surtax represented a larger portion of their overall payable tax. There was much more.
Overall, our Conservative government low tax plan has resulted in savings of $28,600 for a typical small business since 2006. That is about a 34% cut in their total tax bills.
There is another part of this low tax plan, and that includes establishing tax treaties to help improve our system of international taxation, and this is precisely what Bill S-17 will do.
Bilateral income tax treaties, such as the one before us today, are utilized to eliminate tax barriers to trade and investment. Such treaties achieve that purpose in a number of ways. Allow me to explain how. First, they provide greater certainty to taxpayers regarding their potential liability to tax in foreign jurisdictions. Second, they allocate taxing rights between the two jurisdictions so that the taxpayer is not subject to double taxation. Third, they reduce the risk of burdensome taxation that may arise because of high withholding taxes. Finally, they ensure that taxpayers are not subject to discriminatory taxation in the foreign jurisdiction.
These are the great benefits Bill S-17 would bring to the market. It would provide benefits to both taxpayers and governments by setting out clear rules that would govern tax matters relating to cross-border trade and investment.
This is extremely technical legislation, and I apologize in advance. Nevertheless, it is important for the flow of predictable global commerce. For instance, tax treaties permit a multinational business based in one country to be taxed in another country if that business has a substantial presence in that other country. In general terms, if the branch operations in a foreign country are well established and significant, the country where those activities occur will, in most cases, have primary jurisdiction for that taxation. In other cases, where the operations in the foreign country are relatively minor, tax treaties provide that the home country retains the exclusive right to tax its residents. Tax treaties also allocate taxing rights between the two countries as a means of protecting taxpayers from potential double taxation.
This takes several forms, and again, this is all very technical. First, treaties generally include a mechanism for resolving the issue of dual residency of an individual or company, where the individual or company would otherwise be considered to be a resident of both countries. Second, treaties assign the primary right to tax to one country, usually the country in which the income arises, and the residual right to tax to the other country, usually the country of residence of the taxpayer. Third, treaties provide rules for determining which country will be treated as the source country for each category of income. Fourth, and finally, treaties provide rules limiting the rate of tax the source country can impose on each category of income and establishes the obligation of the residence country to eliminate double taxation that otherwise would arise from the exercise of concurrent taxing jurisdiction by the two countries.
In addition to these substantive rules regarding allocation of taxing rights, tax treaties also provide a mechanism for dealing with disputes or questions of application that arise after the treaty enters into force. In such cases, designated tax authorities of the two governments consult with a view to reaching a satisfactory solution under which the taxpayer's income is allocated between the two taxing jurisdictions on a consistent basis, thereby preventing the double taxation that might otherwise result.
In addition to reducing potential double taxation, treaties also reduce burdensome taxation by reducing withholding taxes that are imposed at source. Under Canadian domestic law, payments to non-resident persons of certain passive forms of income, such as dividends, interest and royalties, are subject to withholding tax equal to 25% of the gross amount paid. Many of Canada's trading partners also impose, under their domestic tax laws, similar levels of withholding tax on these types of income. Because the withholding tax does not take into account expenses incurred in generating the income, a taxpayer frequently will be subject to an effective rate of tax that is significantly higher than the rate that would be applicable to net income in either the source or residence country. The taxpayer may be viewed, therefore, as having suffered burdensome taxation. Tax treaties alleviate this burden by setting maximum levels for the withholding tax the treaty partners may impose on these types of income or by providing for exclusive residence-country taxation of such income through the elimination of source-country withholding tax.
Our government's goal is simple, to establish tax treaties that substantially reduce or, in the case of certain types of income, eliminate withholding taxes by the source country. In addition, we must include provisions that ensure that cross-border investors do not suffer discrimination in the application of the tax laws of the other country.
By delivering a favourable tax environment for Canadian businesses, we help them to compete and win internationally, increase investment and create jobs for Canadians.
Tax treaties like those in Bill S-17 would directly support cross-border global trade in both goods and services, which in turn would help Canada's domestic economic performance. The more foreign direct investment that flows into our country, the more investment in capital and in technology. This, in turn, results in more high-quality jobs for Canadians.
In fact, during the committee's examination, Nick Pantaleo, of PricewaterhouseCoopers LLP, remarked that:
...a key objective of the Canadian government is to pursue new and deeper international trade and investment relationships. This is not surprising given that more than 60 per cent of the Canadian economy and one in five jobs in Canada are generated by trade. In my view, tax treaties contribute toward the success of such global trading agreements.
He went on to add that:
It is important that Canadian businesses be provided with greater unfettered access to foreign markets, foreign investment protection and fair tax treatments in foreign nations.... These factors are critical to Canadian business decision making and competitiveness. Access to more and bigger markets will help Canadian companies simply to be more productive.
It would seem clear that the tax treaties contained in Bill S-17 are a critical tool in strengthening Canada's trade and investment relationships and in helping Canadian businesses stay competitive and successful.
However, there is another critical part to these tax treaties. I have already mentioned that keeping taxes low is an important objective for our government and an important part of these tax treaties. However, keeping taxes low also means that all taxpayers should pay their fair share of taxes owing and not be able to hide their income offshore.
Better transparency and the effective exchange of information for tax purposes between taxation authorities are key to ensuring that Canadian taxpayers report their foreign income and pay the right amount of tax in Canada.
We are absolutely committed to combatting tax evasion through the negotiation of tax treaties, as well as tax information exchange agreements or TIEAs. Under the tax treaties and the TIEAs, the competent authority of one country may request from the competent authority of the other country such information as may be necessary for the proper administration of the country's tax laws.
The requested information will be provided, subject to strict protections on the confidentiality of taxpayer information. Because access to information from other countries is critically important to the full and fair enforcement of Canada's tax laws in order to combat tax evasion, the inclusion of an information exchange provision that is consistent with the standards set out in the Organisation for Economic Co-operation and Development, OECD, is an important component of Canada's tax treaty policy.
While TIEAs and tax treaties are critical tools in combatting tax evasion, our government has a number of other tools in its arsenal and a proven record. Overall, since 2006, and including the measures announced in economic action plan 2013, our government will have introduced more than 75 measures to improve the integrity of the tax system.
These measures will help close tax loopholes, address aggressive tax planning, clarify tax rules and combat international tax evasion. In fact, this action will result in closing $2.5 billion in tax loopholes.
Additionally, economic action plan 2013 announced the stop international tax evasion program. This new program would allow the CRA to pay individuals with knowledge of major international tax non-compliance a percentage of the tax collected as a result of information provided. Other measures include, one, requiring Canadian taxpayers with foreign income or properties to report more information and extending the amount of time the CRA has to reassess those who have not properly reported this income; two, streamlining the process for the CRA to obtain information concerning unnamed persons from third parties, such as banks; and third, requiring certain financial intermediaries, including banks, to report their clients' international electronic funds transfers of $10,000 or more to the CRA.
It is measures like these that would help to maintain the integrity of Canada's income tax system. This is important because, when everyone pays their fair share, Canada's tax rates can remain competitive and low. This means that Canadian families and businesses would pay less tax overall, keeping more of their hard-earned money.
To conclude, in an increasingly globalized economy where investment capital is highly mobile, a competitive business tax system is crucial. While Canada has performed relatively well in today's uncertain global economy, we cannot afford to become complacent. The treaties covered in this proposed legislation would promote certainty, stability and a better business climate for taxpayers and businesses in Canada and in the treaty countries. More importantly, these treaties would help to secure Canada's position in today's increasingly competitive world of international trade and investment.
For the reasons I have highlighted today and many others, Bill S-17 would increase our ability to compete and harness the opportunities of a vibrant modern economy. For these reasons, I urge hon. members opposite to support this bill.
