Finance Committee on Feb. 14th, 2013

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

Okay, thank you.

Mr. Wrobel, welcome back to the committee, by the way. You've spent quite a bit of time with us over the years.

You have expressed concern over FATCA, particularly over document retention requirements and the complexity of the act. But you've also spoken in favour of intergovernmental agreement processes the U.S. is developing with a number of European countries, including the U.K.

What would be the key components of a parallel arrangement for Canada?

I'd appreciate also hearing from others as to the efficacy of these types of arrangements.

[Marion Wrobel]

Again, I'll let my colleague talk about FATCA.

[Darren Hannah]

We're supportive of the intergovernmental agreement approach as an alternative to FATCA writ large—the negotiated approach, if you want to call it that, the U.S. regulatory approach—because it creates all kinds of challenges.

Under FATCA, absent the intergovernmental agreement, financial institutions would have to, in effect, agree to provide information across borders on, potentially, Canadian account holders to the IRS, potentially withhold on those who choose not to provide sufficient information to the financial institution, and in some cases close accounts of people. We don't want to have to do that.

The alternative approach is through the intergovernmental agreement, where information is provided to CRA. We think that's a better approach.

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

Mr. Murphy, do you have views on these arrangements?

[Richard Murphy]

As you've gathered, I would prefer simplicity, and the last thing you can describe FATCA as is simple. It is clearly a very complex way of dealing with it, so I don't think it's ideal.

I believe that Europe is actually going to provide a better model for this. The European Union Savings Taxation Directive is now making progress. It was blocked by Austria and Luxembourg for some time, but if you want to look at a model as to how to go forward, I think the revised savings taxation directive is a much better way to go than FATCA.

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

Thank you.

Mr. Wrobel and Mr. Hannah, speaking on behalf of your members, some of the questions Ms. Glover and Mr. Jean were asking were difficult for your organization to answer. Would you ask your members if perhaps their heads of private banking would be willing to appear before our committee specifically to answer the questions that Ms. Glover and Mr. Jean were asking, in terms of what the internal processes are?

There has been a growth in private banking, and this is a legitimate activity, obviously, and I'm not implying otherwise. I think the growth in private banking globally and in Canada is important and is largely positive.

We at this committee have faith that the Canadian banks are solid and strong and ethical in terms of their approaches, but it would be helpful to know what the processes are, to prevent this kind of activity.

[The Chair, Conservative, James Rajotte]

Respond briefly, please.

[Marion Wrobel]

I believe the committee has invited the individual members, and if the committee wishes to invite them again, it's up to the committee, not the CBA, to ask the banks to appear.

[The Chair, Conservative, James Rajotte]

The committee did invite all the banks, and all the banks declined the invitation to appear. Perhaps the committee can invite them again, if the committee wishes.

Thank you.

We'll go to Ms. McLeod, please, for the final round.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair. I want to pick up on a few things quickly, because I don't want to leave some wrong impressions.

Mr. Cockfield, you talked about there being no convictions. I think between April 2006 and 2012, there were 1,282 convictions of taxpayers, 192 jail sentences, and, in terms of the tax evasion associated with offshore bank accounts, there were 44 convictions involving $7.7 million and also $6.8 million in fines and 337 months in jail. Obviously there's a high burden of proof, but we certainly are tackling it in an aggressive way. I wanted to correct that, so that people wouldn't think we hadn't moved forward.

Another thing that is important to acknowledge...I know Mr. Howlett had some brief comments about there not being the resources. Significantly more resources have been put into this area. We heard from Terrance McAuley, one of our senior officials, in the last meeting, and he talked about how they've created research arms and how they're involved overseas. He was very clear in terms of increased resources and the very positive work that is being done on behalf of Canadian taxpayers in dealing with this issue.

We've talked a lot about where we need to go, and I think that's an important conversation, but I think it's also important.... Mr. Wrobel, you've been in the industry for a while, so I will give you an opportunity to comment. You certainly support country-to-country sharing. Some countries continue to have bank secrecy laws and a culture of secrecy, but have you noticed any changes from a global perspective as we tackle this?

[Marion Wrobel]

Again, Mr. Chairman, we support government initiatives designed to deal with tax evasion, to prosecute it, and to prevent it from happening. Some of the things we've seen over the last few years—the kind of reporting that is required from FINTRAC is a relatively recent initiative; anti-money-laundering rules are very strict; banks have to go.... It's quite expensive to comply with the rules, but we understand the motivation behind them and we support that motivation.

So we have seen a number of more global initiatives that are designed to tackle issues that have multi-jurisdictional effects. Those kinds of initiatives are properly done through international forums, rather than by trying to do them unilaterally from one country to another. Tackling single jurisdictions is not effective.

For small countries like Canada, it's very difficult to take initiatives that only Canada is doing that may not be effective and at the same time will penalize our own businesses.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Is it fair to say that you have noticed over the years that what were perhaps some traditional tax havens have become much more open with regard to what's happening in those communities?

[Marion Wrobel]

Just generally, it's recognized that bank secrecy in those jurisdictions is something that is much less acceptable than it was in the past.

At the same time, we recognize that jurisdictions have the right to pursue a fiscal policy as they see fit, just as Canada has decided to pursue tax competitiveness in certain areas. For other jurisdictions, if they want to pursue a type of fiscal policy, and that includes tax policy, it's entirely within their jurisdiction to do so.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

It was interesting that Mr. Murphy and a number of people have had comments about TIEAs. I certainly perceive TIEAs as not being the be-all and end-all, but they are another tool in the toolbox. I appreciated Mr. Murphy's comment with regard to the multilateral sharing and then how a TIEA becomes another tool in the toolbox.

Mr. Cockfield, have you any comments on that particular thought?

[The Chair, Conservative, James Rajotte]

Just a brief comment.

[Prof. Arthur Cockfield]

Briefly, I agree with Mr. Murphy that enhanced multilateral sharing is a good idea. Maybe it could be tied into these bilateral TIEAs in some fashion.

I also agree with him to move the agenda forward, that to simply disclose the identity of the account holder and not their income could be another positive reform suggestion. If people don't want their income shown, then fine, don't show that. Just show the identity of the account holders.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you. I think I'm out of time.

[The Chair, Conservative, James Rajotte]

Yes. Unfortunately, we are at the end of the time for our session.

I do want to thank all of you for being with us here today, especially Mr. Murphy and Mr. Cockfield for joining us by video conference.

I will say to all of our witnesses, both here and by video conference, that if there is anything further you wish the committee to consider, any further testimony you want to provide, please provide that to me, as the chair, or to the clerk. I will ensure that all the members get it and consider it on this issue.

Thank you so much for being with us here today.

The meeting is adjourned.