Finance Committee on March 19th, 2013

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Caron.

Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

Chair, the first thing I want to do is thank the witnesses for being here this morning and for giving their presentations. It's interesting, though. There's nothing in your presentations that I haven't heard in three other meetings previously, or probably in the meetings that have been held in the last six or eight years, or however many years you want to go back, since the last set of changes.

Chair, out of respect for these witnesses—and I hope the opposition party will start showing respect to the witnesses, too—and their time and the money we spend to bring people in for this, and in listening to their request that we just get on with it and get this piece of legislation passed and move forward, I'm going to let my time go. I really don't have any more questions that I haven't heard or that haven't been asked at previous meetings. I see no reason to use up their time ineffectively, so I will give my time away to the next person. If the NDP needs a little more time, feel free. I think we should just get on with it and pass this.

[The Chair, Conservative, James Rajotte]

Thank you.

Ms. Glover, you have the next round, so I can give you an extended round. Is that okay?

[Shelly Glover, Conservative, Saint Boniface, MB]

Thanks. I'm going to try to make this brief as well.

I want to thank the witnesses for being here again. We've met many times before, some of us.

I have to say, Mr. Moody, that although you may have Alberta blood, you make a lot of sense to us Manitobans. In that vein, I want to ask you a specific question, but it has much to do with what you've already addressed, the question of solicitor-client privilege.

Just for the record—because we've heard the one side by Mr. Tremblay, for those watching—the B.C. case is not at all a tax issue, first and foremost. It's not at all a tax issue. When the proceeds of crime legislation was first enacted in 2001, lawyers and Quebec notaries were required to report suspicious transactions of their clients. That's what the case in B.C. is about; it's not a tax case at all.

For example, if a client paid a $10,000 bill in cash to a lawyer, the lawyer was required to report those kinds of suspicious transactions. That's why the law societies have challenged this, and have been challenging it for more than a decade that it has been before the courts.

So this is a different act and a different tax issue completely.

Mr. Moody, you hit the nail on the head, because you said that Bill C-48—in fact, page 836 of Bill C-48—actually specifies and clarifies that a lawyer who acts as a legal adviser to a client is not required under the regime to report information about tax avoidance transactions that is covered by solicitor-client privilege. I understand that this clarification was made after consultation with the Canadian Bar Association and the federation in 2010.

Let's move to Mr. Tremblay's concern. The federation is now saying that all lawyers and Quebec notaries should be exempt from the reporting rules. Well, I think the concern here is that if we do a broad exclusion like that, it would significantly undermine this law's effectiveness. The obligation on advisers under Bill C-48 to report exists only in situations in which their fees are contingent on a client obtaining a tax benefit from an avoidance transaction or in which the tax benefit is otherwise guaranteed to the client.

So when the lawyer puts his own skin in the game—when he has money dependent on what comes back—that's when he's required to report. In these circumstances—of course, advisers and promoters already have a personal interest, as I just described, in the success of the reportable transaction—if a lawyer does this, he or she has compromised his or her independence and duty of loyalty to the client and ought to report. I think this is a good compromise.

I want you, Mr. Moody, to comment on the fairness of this. Frankly, if tax advisors have to report and lawyers start to do the same job you're doing under a cloak of secrecy for their own benefit, it will put you out of business, will it not?

Do you think this is a compromise that is fair?

[Kim Moody]

Wow!

I think I understand Mr. Tremblay's concern, but without trying to put words in his mouth, I'll try to at least summarize it from what I understand.

The concern is about what advice is solicitor-client privilege, and thus gets the statutory exemption from the reporting rules, and what is not. Unlike what many lawyers think....

I'm a student of privilege. I'm not a lawyer, but I have studied privilege for the last 20 years, roughly. Without trying to brag, I probably know more about privilege than the average lawyer. Having said that, it's a very difficult area, to determine what is privileged and what is not.

I'm guessing that my colleague is suggesting that we don't want to be put in a position like this, in which we have to decide what's privileged and what's not. I can sympathize with that. I understand that.

[Shelly Glover, Conservative, Saint Boniface, MB]

Well, Bill C-48 actually clarifies it, and I think it's pretty clear: when the lawyer is going to obtain some kind of fee because there's a tax benefit from the tax avoidance measure—so when he has skin in the game—that's when it's reportable.

[Kim Moody]

I'm not sure what to say. I love the legal profession; I certainly respect privilege. Frankly, the Supreme Court has said it's a constitutional right. So I get it.

However, do I think that lawyers should be able to simply wave their white flags, or...white flag is the wrong word, but just wave a blanket exemption and say, no, we're not going to be subject to these rules because it's privileged? No, I don't think so, because, to your point about whether it compromises non-lawyers, yes, it does.

Does that situation raise policy reasons for having people, such as a lot of the people around our table here, possess statutory privilege? Perhaps it does. But that's a question for another day.

[The Chair, Conservative, James Rajotte]

Ms. Glover, Mr. Tremblay wants to respond to your question as well. He's waving.

[Gérald Tremblay]

I've been seriously attacked and I want to answer.

[Shelly Glover, Conservative, Saint Boniface, MB]

Oh, no, I didn't attack you, Mr. Tremblay.

[Gérald Tremblay]

That's okay; I'm just joking. Don't worry.

First of all, the problem is not.... If you compare the money laundering legislation and this legislation, it's true that they're on two separate topics, but the reporting requirements for a lawyer, in whatever area we are talking about, raise a very serious privilege issue, in whatever domain you are.

On the second point, about the benefit, I don't buy the argument at all, because you have lots of cases in which you have contingent fees, as for instance in class actions or in medical malpractice. A poor lady does not have any money and she has been the victim of a bad operation. She doesn't have the cash to put forward to bring an action. The lawyer will say, “I'll take 30% of whatever I get for you.”

Do you think that type of arrangement would affect the solicitor-client privilege? To link the method of fee arrangement to the privilege is I think a very dangerous, slippery slope, and I would strongly recommend that you not get into it at all.

For lawyers, with money laundering the basic deal that was struck with the government—but it was not enough, so that's why we went to court anyway—was that if the law societies do whatever is required to discipline bad lawyers....

I have a good quotation here: “When men are pure, laws are useless; when men are corrupt, laws are broken.” Disraeli said that.

If the law societies have what it takes, by way of their own regulations and the staff to enforce them, to discipline the bad lawyers, that is enough. The independence of the bar is very important for the general public.

[The Chair, Conservative, James Rajotte]

Ms. Glover, you have one minute.

[Shelly Glover, Conservative, Saint Boniface, MB]

In response to that, Mr. Tremblay, I absolutely respect the solicitor-client privilege. I spent a lot of time in law enforcement, and it's absolutely crucial to the fairness of the justice system. So I commend you for the work that you do. I don't mean to attack you, but the position that you put forward is what I take issue with.

To be very frank, the suggestion that a malpractice suit is somehow similar to tax avoidance—to advice given to a Canadian to avoid paying taxes to the government, taxes that help us pay for the medical system, etc.—is far-fetched. I'm sorry; I'll disagree with you there.

The easiest way to stay out of this is not to make your fees contingent on a tax benefit from tax avoidance, plain and simple, and then continue your work as a lawyer. Let the tax advisers do the work that they do, and let them report it and be transparent to the government, in the best interest of Canadians.

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, we're going to—

[Gérald Tremblay]

If you do it and you should not do it, you don't lose privilege.

[The Chair, Conservative, James Rajotte]

We'll have to let this be a matter of debate.

Colleagues, we are at the end of our rounds. I'm advised that at least two of the members wish to move their motions today, so I'm suggesting that we thank our witnesses at this point and move to motions.

I thank our witnesses very much for their presentations today. We've talked about some interesting blogs. I know members will want to be reading up on those as well.

If there is anything further that you wish the committee to study, please send it to the clerk. We will ensure that all members get it.

So I will thank our witnesses and excuse them. But colleagues, I want you to stay at the table. We will start on our motions right away.

Thank you very much for being here today.

[Gérald Tremblay]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Colleagues, let me offer a reminder that amendments for this bill should be sent to the clerk by Thursday, March 21, before 5 p.m. I think everybody is aware of that, but I want to put it on the record. Amendments should be sent by 5 p.m. Thursday.

We have four motions, but I'm advised that Mr. Hoback and Ms. Glover want to move their motions.

We'll start with Mr. Hoback.

Everybody has a copy of the motion, but, Mr. Hoback, perhaps you could read the motion and then explain why the committee should adopt it.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair.

I'll read the motion first:

That the Standing Committee on Finance undertake a study on emerging digital payments systems (such as “mobile wallets” and “near field communications”) in Canada, including but not limited to (i) an overview of new digital payment technologies, including the challenges and opportunities they present (ii) an overview of the evolving role of Government oversight of these systems (iii) how best to ensure small businesses and consumers benefit from these new systems; and that the Committee report its findings to the House.

The reason behind it is that as we look forward to these new technologies with smart phones and near field communications, there are some issues with consumers' awareness and consumers' eyes on protection, privacy, and what happens with the information. There are also some concerns about the type of data and the information that's being presented. This is going to replace a wallet some day. As a committee, it's important for us to understand how this system is working and the impact it will have, not just on the business community but on consumers and constituents.

We should take a few meetings to go through this new technology and get some opinions from people in this field on where it's going and have an understanding of any types of regulations, if any, that are going to be required. We should make sure to be positioned properly as this new technology emerges. That's why the proposal is there.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hoback.

Mr. Caron will speak to the motion.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Before coming to the Standing Committee on Finance, I was on the Standing Committee on Industry, Science and Technology. I'm not sure whether Mr. Hoback is aware, but that committee conducted an almost identical study to this one in the past year. It studied e-commerce, including the various electronic payment methods such as mobile payments. The report came out no more than six months ago. It is quite extensive, with over 80 pages.

Consequently, I suggest that we review the report to determine whether it would be appropriate for the Standing Committee on Finance to study the subject. Furthermore, if Mr. Hoback was interested in a more focused study, addressing, for instance, the very specific payment methods he mentioned, I think the industry committee would be better equipped than the finance committee to handle that.

The committee has limited time and the budget and budget implementation bills are imminent. So I don't necessarily think redoing a study that has already been done by another committee is the best way to use our time.

[The Chair, Conservative, James Rajotte]

Merci.

I have Ms. Glover and then Mr. Jean.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I want to commend Mr. Hoback for the proposal. I want to add that the finance department is actually responsible for much of the oversight for measures that affect consumers, like this new digital payment. Unfortunately, the industry committee hasn't looked at what the responsibilities in that area would be. That's why the finance ministry would take some good best practices from a study like this. Of course, we've heard numerous times the NDP ask questions about protecting consumers in the House of Commons. As a government, we have developed the code of conduct,and we continue to look for ways to ensure consumers are protected.

Again, the industry committee did not look at the oversight mechanisms. They did not look at how the Office of the Superintendent of Financial Institutions would play a role in that. Because of that lapse, this is a tremendously important proposal put forward by Mr. Hoback. I intend to support it. I intend to continue to protect consumers as well as we possibly can. This is just one more piece towards making sure we continue that.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Jean, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

You took the words out of my mouth.

My understanding of the industry committee report was that it was more technical in nature, in relation to the specifics of it. My understanding is that we could actually utilize more of the financial implications...what this new technology means, and use the industry report to do that. From my perspective, it was more industry-specific on the industry committee, dealing with the technology, whereas this would be more of the financial implications.

Mr. Caron, I have not reviewed the industry report, but I will be supporting Mr. Hoback's recommendation as well.