Evidence of meeting #59 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was problem.
A recording is available from Parliament.
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chairman.
Thank you to the witnesses. It's an interesting panel.
Mr. Cockfield, I think in your opening remarks you said that you're in favour of Canada signing agreements with OECD countries, if I'm not mistaken.
9:55 a.m.
Associate Professor, Faculty of Law, Queen's University, As an Individual
Well, we already have agreements with all the OECD countries.
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
And you think it's a good thing. Is that right?
9:55 a.m.
Associate Professor, Faculty of Law, Queen's University, As an Individual
Absolutely.
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I'm not saying it's a bad thing, but I'm just saying it's irrelevant in terms of catching tax cheats, because if I'm trying to hide money offshore, I'm not going to go to an OECD country. I'm not going to put my money in Germany or the U.S.
9:55 a.m.
Associate Professor, Faculty of Law, Queen's University, As an Individual
Right. I think the point I was trying to make is that if these countries—that's where all the tax cheats are located—could agree to a multilateral treaty, they could create a system. Reuven Avi-Yonah, an American academic, has written extensively about this: you would impose a withholding tax on any payments outside of this group, and that might shut it down.
All the money is coming from the OECD countries, and you're exactly right, it's leaving these developed—
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So how would you tax the money when it leaves? Why couldn't you do that now, even if you didn't have all the OECD countries on board? Why couldn't you do it unilaterally?
9:55 a.m.
Associate Professor, Faculty of Law, Queen's University, As an Individual
We try to. Our laws mandate the taxation of these funds. The problem is that nobody discloses it.
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Even if you were to have an agreement, whether it be with five extra countries or 37 other legitimate countries that actually tax transactions properly, I don't see how you would monitor that.
I understand your point, but I'm just not sure how that would—
9:55 a.m.
Associate Professor, Faculty of Law, Queen's University, As an Individual
I agree. The larger point I think you're making is that there's always going to be leakage in the system. I'm saying there could be more comprehensive multilateral cooperation, but there's always going to be leakage.
In similar problems that are occurring, we're cracking down on tax havens, and some of them are cooperating and some of them aren't. The OECD has reviewed certain countries and it said they're not meaningfully implementing the TIEAs. As long as you have one country that's not playing ball—and this is your point, I think—then you're going to have leakage out of our system.
Maybe there are ways to reduce the problem, but I don't think it will ever go away.
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
We have a little bit of time. Perhaps you could expand on this amnesty, and I could get both your comments, Mr. Cockfield and Mr. Rosen.
There are two problems. It's a short-term problem, in terms of getting the money that's out there now, and then there's the long-term problem of how you stop it from happening again.
The short-term problem is the question of amnesty. I've been hearing conflicting remarks from both of you. You're not in favour, but you say maybe it's the best thing to do because our authorities are not necessarily going after tax cheats. You say there's no energy, no money, no resources.
In the short term, would amnesty be the preferable solution? Nobody, I think, is questioning the fact that these people should be getting away with it, but in other jurisdictions it has worked.
The penalties are maybe a bit too extreme, and it's not encouraging people to come back, but in the short term, don't you want some of that capital to come back?
Perhaps you could try to keep your feelings aside in saying we're not going after them or they don't necessarily need to get a free pass. There has to be a way we can get some of that money in the short term, and then find another mechanism to avoid it from happening in the future.
9:55 a.m.
Accountability Research Corporation, As an Individual
Yes, but this is a cost-benefit issue. It's a long-term issue, as you mentioned.
Again, I see the amnesty as the low-hanging fruit, which one gets tired of hearing about in politics across the country because it means you don't deal with the issue.
If we want to take whatever money is available and, let's say, put it into—
9:55 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
It's not “if”. My question is, do we want to? You're the expert.
9:55 a.m.
Accountability Research Corporation, As an Individual
I'm saying we absolutely have to. On the side of what is motivating the people in the first place to collect this money—mostly beyond the Criminal Code—I would rather see the effort go into that side, rather than going into a temporary collection.
The money is not freely available, as everybody in the room knows. Let's put it where it's going to have the most motivating effect in discouraging the people with these security scandals.
10 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
You're saying the money to enforce is not readily available.
10 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Then wouldn't you be in favour of an amnesty right away, and then eventually more—
10 a.m.
Accountability Research Corporation, As an Individual
Financing your longer-term by the low-hanging fruit? I can't disagree with that, but how much are you going to get?
10 a.m.
Accountability Research Corporation, As an Individual
Look, I see nasty security scams virtually every day in this country that go uninvestigated. What is wrong with us that we—
10 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
As a taxpayer, doesn't that bother you? As an accountant, I see that as well, and it bothers me. But I feel that with some of them who are doing this it would just take a bit of encouragement and they would come back into the system. That's what I see.
10 a.m.
Accountability Research Corporation, As an Individual
I've been on the side of getting prosecutions that have been effective. I know how much effort is required to do that. I see some of these other ones reported that, gee, we didn't get a conviction here, there, and everywhere. Just look at IMET, for heaven's sakes, and how much money has gone into that. I would rather see us put in a solid effort on a couple of the high-profile cases and get the message across to the rest of the world that Canada means business.
February 17th, 2011 / 10 a.m.
Conservative
Russ Hiebert Conservative South Surrey—White Rock—Cloverdale, BC
Thank you.
There are lots of questions here. I ask you to try to keep your answers brief, if possible.
Mr. Rosen, in your submitted document you make the statement that after 9/11 the U.S. pushed to limit finances paid to terrorists and tightened up certain transactions. Then you say, “If the so-called “clean-up” goes too far, however, implications can be extensive. Certain islands that have multiple merits could be forced into bankruptcy and poverty. How far reform should/can logically proceed are vital matters.”
Could you explain that? You're saying that if Canada, the U.S., or some other country goes too far to tighten these transactions, certain island tax havens are going to lose such a large portion of their revenue that they'll go bankrupt.
