My name is Brian Ernewein. I'm the general director in the tax policy branch at the Department of Finance. I'm joined by my colleague, Alain Castonguay, who's the head of our tax treaty and tax information exchange agreement section at Finance.
Thank you very much for the opportunity to appear before the committee today to discuss the subject of offshore bank accounts held by Canadians, the actions being taken by Canada to combat international tax evasion, and Canada's involvement regarding the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Since 1996, the OECD project on harmful tax practices, with Canada's participation, has identified a lack of transparency and of exchange of tax information as undermining the ability of tax administrations to enforce their tax laws and to combat international tax evasions.
By way of context for this, a number of jurisdictions have maintained bank secrecy laws that made it an offence for any bank to share information about its clients with anyone, including foreign governments. Such laws can encourage Canadians to use banks in these jurisdictions either to hide money or to earn investment income that they don't intend to report in Canada. This, of course, is fundamentally unfair to the vast majority of Canadians who report all of their income and pay their taxes.
In 2000, OECD and non-OECD countries, including Canada, formed a Global Forum on Transparency and Exchange of Information to promote the OECD standards of transparency and effective exchange of tax information—what we refer to as the OECD standard.
Basically, the OECD standards with regard to bilateral agreements posit three simple ideas. First, a country should provide another country with tax information when such information is pertinent to the administration of tax laws in the other country.
Second, the exchange of tax information should not be covered by any domestic legislation that guarantees tax secrecy.
Third—and this applies particularly to countries that do not impose any taxes—a country should provide tax information notwithstanding the fact that it might not have any domestic interest in the requested tax information.
The OECD standards implemented through the conclusion of tax treaties and tax information exchange agreements—TIEAs, as we call them—enable tax authorities to access information relevant to their tax matters in order to better enforce and administer their tax laws and to help prevent international tax evasion. The Global Forum drafted the text of a TIEA that has since been used by most jurisdictions, including Canada, as a model to negotiate bilateral tax information exchange agreements.
The turning point in the implementation of the OECD standard was the 2009 G-20 summit in London. In April 2009, the leaders of the G-20 stated that they stood ready to take action and deploy sanctions to protect the public finances and financial systems of their countries against jurisdictions and tax havens that have either not committed to the OECD standard or have failed to implement it.
Since that time, the pace of negotiation of TIEAs and of protocols to incorporate the OECD standard in tax treaties has increased dramatically. We've checked back, and as of April 2009 there were 65 TIEAs and protocols that had been negotiated internationally. As of October of this year, that number is above 560.
What are we doing to combat international tax evasion here in Canada? In Budget 2007, the Government of Canada announced a policy that introduced incentives to have non-treaty countries enter into TIEAs with Canada that include the OECD standard on tax information exchange. The 2007 budget also stated as a government policy that all new treaties and revisions to existing treaties would also have to include the new standard for tax information exchange.
To date, we've signed 11 TIEAs, and we hope all of these will enter into force next year so that CRA can start to rely on them to obtain information from the jurisdictions they cover. We've also been involved in TIEA negotiations with 14 other jurisdictions, and we hope to conclude negotiations and seek approval of these TIEAs so that they may be signed as soon as possible.
Of Canada's 87 tax treaties in force currently, all but seven meet the current OECD standard regarding exchange of tax information. Of those seven that do not, we've recently signed a protocol with one of them—that is Switzerland—to bring the new standard into play and have commenced negotiations or renegotiations with each of the other six to update the exchange of information provisions in those treaties so that they meet the OECD standard. Again, we hope to conclude negotiations and seek approval of those revised treaties as soon as they can be signed, and we hope that signature comes as soon as possible.
Finally, there are other provisions in our income tax laws, either in force or currently proposed, that can be important tools in dealing with international tax avoidance. These include our foreign reporting rules, the taxation of investments in foreign investment entities, proposals to tighten our non-resident trust regime, and new reporting obligations in the last budget for those who participate in aggressive tax transactions.
I won't review the details of any of those rules in my opening remarks, but perhaps there's an opportunity to discuss them during the questions today.
Thank you.