Hon. Pierre J. Dalphond moved second reading of Bill S-264, An Act to establish International Tax Justice and Cooperation Day.
He said: Honourable senators, I rise today to introduce Bill S-264 to establish international tax justice and cooperation day.
You might be thinking to yourselves that this is just one more international day. That may be true, but of the 200 international days recognized by the United Nations, not one of them has any connection whatsoever to taxes.
I think it’s important to correct that oversight for two reasons. First, taxes are an essential part of the social contract in all societies of the world and they often represent the biggest expenditure in people’s budgets. Si I think it’s important to have a day in the year where we collectively consider the importance, usefulness and effectiveness of taxes in our societies.
Second, whether we’re talking about the Pandora Papers, the Paradise Papers or the Panama Papers, multinational companies that are profiting from double non-taxation, e-commerce operations that all too often manage to get out of paying their fair share of taxes, or tax havens, news reports regularly remind us of how such tax scandals are continuing to occur and of how much they affect Canadians’ confidence in their institutions.
In fact, I think everyone will agree that all of these scandals led to a growing need for cooperation between countries and tax authorities around the world, especially in Canada.
The concept of tax justice evolves with the times and in various parts of the world. It also varies depending on the type of tax, its function, its shape, its base and public acceptance. Whatever its definition, however, the need for tax justice is as old as taxation itself. History shows, with its various tax revolutions, that if any form of taxation exists, it must be fair.
Tax justice is so important that several countries, including France and Italy, have elevated the notion of a “fair share of taxes” to the status of a law in their constitutions.
Tax fairness is at the heart of Canadian taxation. For example, in our recent 2023 budget, our government prioritized the notion of a fair share of taxes and fair taxation of taxpayers, corporations and digital companies.
As Senator Downe so wisely reminded us on April 18 in his speech on Bill S-258, beyond the considerable loss of money for tax authorities, it’s also unfair to those who play by the rules and are being deceived by those who are skipping the system.
As parliamentarians, we have a duty to ensure that people living in Canada and companies operating in Canada pay their fair share of taxes. This requires a high degree of cooperation between countries and adherence to international tax rules that are fair to all.
In fact, societies rise up — rightly or wrongly — against tax injustice for two reasons: non-compliance with the applicable rules and, from a moral standpoint, the feeling of injustice.
Taxation without tax justice cannot be allowed to continue. However, it doesn’t stop there. These days, in a world that is ultra-connected since the advent of the internet, taxation must be coupled with international tax cooperation if it is to exist fairly and effectively. Taxation is one of the components of a sovereign state; therefore, it is up to each state to decide whether they will cooperate.
International tax cooperation has several advantages for countries. For example, by cooperating with each other, countries have managed to put an end to banking secrecy over the last 10 years and, as a result, significantly curb international tax evasion.
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.
Most importantly, international tax cooperation is crucial to addressing international tax competition. Indeed, some states are waging veritable tax wars to attract capital and investment, but this also results in the erosion of other countries’ tax bases.
For a long time, tax regimes were established by governments without any consideration for the consequences this might have outside their borders.
Over the years, globalization of the economy and trade liberalization — starting with capital and the dematerialization of activities — have been a game-changer. Governments have become stakeholders in global economic competitiveness, and having a competitive tax environment has become a weapon.
Although the movement of capital around the world has always existed, it is the ease and speed with which it happens that is now an issue.
Considerable sums can be transferred with a simple click of a button to the other side of the world, without being traceable or being tracked in either direction.
At the end of the day, these are national budgets that come with a cost, 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, for example.
Another notable consequence is that, to continue to offer an adequate level of services with fewer resources, the tax burden is spread out differently among the remaining taxpayers. This can translate into direct or indirect tax increases.
What’s more, the lack of fiscal cooperation primarily affects developing countries. To remain attractive and receive foreign investments, the most vulnerable countries are sometimes forced to sacrifice their right to tax the activities that occur in their jurisdiction.
This means fewer resources for states that are already heavily indebted and that often find it hard to deliver sufficient infrastructure and services to their citizens.
As we can see, every country is dependent on the legal and fiscal framework of its neighbours. This interdependence should make all countries aware of the need to cooperate. There are no long-term winners in this tax competition. There are only losers between countries. All countries have much to gain if they cooperate. The aim is not to restrain public or private economic players, but to establish the rules of the game in order to balance different interests.
Of course, the challenge is not a simple one in a globalized, financialized economy that is sometimes considered borderless, because, at the same time, tax issues and tools are attached to countries and borders. We therefore need to rely on the goodwill of each country to participate in a collective movement without feeling like it’s losing an advantage.
Despite the difficulties inherent in international tax cooperation, progress is being made, which is welcome news. We’re seeing one initiative after the other, both bilateral and multilateral, most likely thanks to public pressure, a certain political will on the part of leaders and some high-profile media cases. I’d like to highlight a few multilateral initiatives here, because they’re broader in scope and more likely to have a global impact on the international community.
In recent years, there have been numerous initiatives, notably under the aegis of the Organisation for Economic Co-operation and Development, or OECD, to advance tax transparency and cooperation, combat fraud and establish tax harmonization rules for greater tax justice. Since 2009, under the mandate of the G20 and since this Group of Twenty declared the end of banking secrecy, the OECD has been working within the Global Forum on Transparency and Exchange of Information for Tax Purposes, made up of 168 states and jurisdictions, to implement international standards designed to put an end to the problems associated with tax evasion, tax havens, double taxation and money laundering.
In 2012, member states of the OECD and the G20 adopted an action plan to curb tax base erosion and profit shifting. This plan aims to prevent tax optimization strategies by companies that take advantage of the lack of international tax harmonization and cooperation.
Among the achievements of this plan, I note the creation in 2016 of the Platform for Collaboration on Tax, a joint initiative of the OECD, the International Monetary Fund, the World Bank Group and the United Nations. This platform is notable in two respects. First, it allows these four organizations to more easily exchange information relating to their operational activities. Furthermore, it facilitates the provision of technical assistance to developing countries seeking to strengthen their capacities and have a greater influence when international rules are formulated.
In 2019, the OECD proposed rules for the establishment of a global minimum tax on corporate profits. In July 2021, 130 countries agreed on this standard, which should come into force in 2024.
A century earlier, circumstances seemed equally opportune for states to establish the first harmonization of international taxation after the First World War. Indeed, in the aftermath of the First World War, the costs of debt and reconstruction were particularly high for all belligerents. Increased direct taxation was a lever widely used by governments, provoking capital flight.
However, in the absence of any transmission of tax information between state administrations, it is easy to evade taxation altogether. Moreover, multinational companies making profits in several countries incur multiple taxation. It therefore appears necessary to collaborate on a larger scale to not only curb the effects of double taxation but also stop export tax evasion.
The Genoa Conference of 1922, attended by 34 countries, launched the movement towards multilateral collaboration on taxation. Under pressure from the French and Belgian governments, a resolution was passed to set up the first permanent international tax committee under the auspices of the League of Nations, of which, incidentally, Senator Dandurand was the second president. This committee, named the Committee of Experts on Double Taxation and Tax Evasion, tackled both issues jointly for the first time — tax evasion and double taxation.
At the time, the committee’s Italian president recalled the ambitious and broad objective of reaching an agreement which would “eventually be the subject of an international convention.”
Interestingly, the committee held its first meeting on June 4, 1923, just over 100 years ago. This is why this bill proposes that June 4 be the international tax justice and cooperation day.
This is still a burning question a century after this international tax committee began its work. The establishment of an international tax justice and cooperation day would provide an opportunity to debate this major issue in order to continuously improve our common tax regulations in a constructive manner, without waiting for public scandals to occur.
Canada is an important player when it comes to international tax reform. Our country has an important seat at the negotiating table in its bilateral and multilateral relations with major international organizations, such as the United nations, the OECD, the G7 and the G20.
With this bill, I am proposing that Canada become the first country to suggest to the United Nations to establish such a day and that we continue to be a leader on this issue, which is so important to global justice and stability.
Although I’m alone in bringing this bill before you today, I do so as the spokesperson for many influential stakeholders, organizations and leaders who are all engaged in this noble cause. I’m thinking, of course, of Brigitte Alepin, a well-known tax expert in Quebec and elsewhere in the world, but also of CPA Quebec, UQAM’s School of Management, the International Consortium of Investigative Journalists, and figures like Pascal Saint-Amans, former director of the OECD’s Centre for Tax Policy and Administration.
Your honour, honourable senators, in addition to the binding legal standards that are absolutely indispensable to ensure tax justice and cooperation, we also need to launch more symbolic initiatives that seek to promote greater awareness of public opinion. Let’s be as ambitious and exacting when it comes to tax justice and cooperation as our ancestors were, as Senator Dandurand was, over 100 years ago.
Thank you for your attention. Meegwetch.
Hon. Senators: Hear, hear.