Finance Committee on Dec. 13th, 2010

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to thank our guests for coming today and providing the information.

In this area, as in many areas, numbers can be thrown around and put before the public, and let's be frank, the public doesn't have a great understanding—and neither did I, until I started looking at the issue—of what actually is happening; I think that's only fair.

For example, we had a comment about recoveries. It could have been about collections and not about audits of international activity that are happening. I don't know what happened 15 or 20 years ago, when that minister was there, but I'm guessing it was about collections.

Just give me some examples. Based on what you've responded to other members, we don't—or your organization doesn't—waste a lot of time trying to come up with a guesstimate number on what the outstanding numbers might be. You're actually going after those who are either avoiding taxes—which is not a criminal offence, but there are penalties and so on, and we need to get that money back—or those who are purposely not paying taxes, and that is a criminal offence. Based on the answers you've given here today, you're actually actively pursuing those avenues.

Based on the numbers you've told me, back in 2005 and 2006 it looks as though there were about 278 cases, and about $175 million was recovered—found, recovered, paid back, or whatever. By this time last year there were about 1,250 cases and about $1 billion.

Is that because you have more resources? Have we been spending more money in this particular area, with more people doing it? Is that what is generating that tremendous increase in recoveries?

[Lyse Ricard]

This is correct.

[Mike Wallace, Conservative, Burlington, ON]

And how long has that process been in place? Does it take a year, two years, three years? Are there people available for hire to do that work?

How long have we been at this improvement?

[Lucie Bergevin]

I'll answer the question. I think I understand.

We received funding several years ago, maybe four or five years ago. With that, we have increased the coverage of transfer pricing, of aggressive tax planning. The way we operate is we have tax services officers who do the work. That means more employees to do some audits, and that is what has resulted in better results.

[Mike Wallace, Conservative, Burlington, ON]

One of our opposition party members has been standing up in the House and saying things such as that we have reduced our activity in this area by 16%, in terms of the government slashing the enforcement budget by 16%.

Is that an accurate statement, or do you have any idea where they would find that number?

[Lyse Ricard]

We have received additional funding for international work twice--for example, in 2006 and 2007. We have increased our international audit program by 44%, from 300 employees to close to 440, and the aggressive tax planning from 244 to 500 employees. But they're not the only ones involved in these things.

So they have doubled in the aggressive tax planning, and of course in relation to that have additional funding. You need funding for that: our lawyers to help us go to court; the additional....

[Mike Wallace, Conservative, Burlington, ON]

There have also been statements made that this government is turning a blind eye to tax evasion and that we're changing the rules to make ourselves less aggressive on tax evasion, and so on.

Is that true? Has that happened in your department? Are there any changes that have occurred?

[Daniel Paillé, Bloc, Hochelaga, QC]

Indeed.

[Mike Wallace, Conservative, Burlington, ON]

I'm asking them and not you. Thank you.

[Lyse Ricard]

The numbers speak for themselves. We have increased our capacity, our knowledge, our expertise, sophistication, and we're going after that.

I can tell you that we have very passionate employees working on this. It takes a lot of patience, a lot of rigour, and a lot of knowledge, and they have to continually study and learn new things.

[Mike Wallace, Conservative, Burlington, ON]

Well, keep up the good work, and thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

I want to commend Mr. Wallace, as a Conservative, for his strong support of the public service. It's good to see, from—

[Mike Wallace, Conservative, Burlington, ON]

You were a Conservative once.

[Scott Brison, Liberal, Kings—Hants, NS]

No, I was a Progressive Conservative. There is a big difference.

[Some hon. members]

Oh, oh!

[Scott Brison, Liberal, Kings—Hants, NS]

In any case, I have a question on the relationship between those who would evade paying their taxes in Canada and potential proceeds from organized crime.

How closely are you working with other enforcement and investigative agencies, including the RCMP white collar crime unit? Are you working closely with them on some of these issues, with the assumption that some of those who would want to hide proceeds of crime might do so through offshore accounts?

[Richard Montroy]

Thank you, Mr. Chair.

Yes, indeed we do work extensively with law enforcement agencies and FINTRAC. FINTRAC has a system in place whereby they would send information to the CRA in cases they've noted in which there is possible tax evasion.

We also work closely with our colleagues in Finance to get amendments that we need. In the last budget, tax evasion was considered a predicate offence. The various pieces of legislation were changed to ensure that in cases when we do go to court and we prove tax evasion, the proceeds-of-crime and money-laundering provisions apply to allow us to go after the assets and the money of those convicted of tax evasion.

[Scott Brison, Liberal, Kings—Hants, NS]

How strong is the linkage between offshore accounts and organized crime?

[Richard Montroy]

As the tax administrator, I would say it is very difficult for us to answer a question like that. My colleagues in FINTRAC and the RCMP would perhaps be in a better position to answer.

[Scott Brison, Liberal, Kings—Hants, NS]

Some of the Canadian banks have very effective private wealth management arms—Harris Bank, with BMO. In fact all of the chartered banks have very strong wealth management groups.

If you take Crédit Suisse as an example, or a UBS, do you see any difference between the services that Crédit Suisse and Harris Private Bank might provide? Do you see any potential product differentiation?

[Richard Montroy]

I'd like to be able to say that as a public servant I'd never have any dealings with Crédit Suisse or those types of institutions, so I personally cannot comment about the services they provide. I'm not aware of them.

[Scott Brison, Liberal, Kings—Hants, NS]

I'm a public servant in a sense too, so I share your pain.

My point is that given the strength of our Canadian banks and the efficacy of our Canadian banks' private wealth management arms, doesn't it strike you that there is one key difference in terms of what they can offer their clients and what a Crédit Suisse or a UBS might be able to offer?

[Lyse Ricard]

I don't think we can answer that question.

[Scott Brison, Liberal, Kings—Hants, NS]

May I make a suggestion? I'm not trying to tell you how to do your jobs, but if I were you, I think I'd be assuming that what a Swiss bank would offer over a Canadian bank would be the relative ease of hiding money. Would there not be a disproportionate level of participation in offshore accounts amongst Canadians who are clients of Crédit Suisse or UBS? Or have you investigated that?