Finance Committee on June 17th, 2013

[Brian Ernewein]

Thank you very much.

I appreciate that I'm sort of an add-on here, so I will try to be brief, but I'm glad that you did return to this point, Chair, because the fact of the matter is that we do have some concerns. Perhaps they're not as grave, but we think they're still material for Canada in terms of treaty shopping. Indeed, a couple of the treaties that are in this package do contain, in the treaty proper, a rule trying to limit treaty shopping.

It's also the case that the 2013 federal budget proposed a consultation on treaty shopping, that is, the development and implementation following consultations, if that's where it ends up, on a domestic rule to try to curb the use of treaty shopping. It is all of a piece, I think. The U.S. has been engaged in this for quite some time, as we have more recently, but we do have some of those same concerns.

[The Chair, Conservative, James Rajotte]

Thank you. I appreciate that.

We'll now go to Mr. Rankin, please.

It's your round.

[Murray Rankin, NDP, Victoria, BC]

Thank you, Mr. Chair.

I think I'd like to ask Mr. Howlett a question first, and perhaps invite Mr. Deneault to respond, if he would.

I'd like to explore the relationship, as you did, between Bill S-17 and these double-taxation treaties and shell companies, and therefore beneficial ownership. You spoke a little bit about that, about the use of setting up shell companies and tax havens without knowing who the beneficial owners are of the shares of those companies. In a sense, my question is this: is there anything in these double-taxation treaties to address the problem of shell companies that you identified?

[Dennis Howlett]

No, not in my examination, but my point is that unless you have better rules globally on beneficial ownership, then none of this will be of any use at all, because if you can't establish clearly where the ultimate owner of a shell company or a trust account or any other instrument resides, then whom do you share that information with in another jurisdiction? If you can't establish clear rules on beneficial ownership, then everything else won't work.

The fact is that in many countries there is secrecy. With banking secrecy, it's possible to register companies without the local authorities really doing to any due diligence to establish who the ultimate owner is. As long as that kind of situation is allowed to prevail, then we're never going to be able to have.... Even automatic information exchange won't work, let alone these bilateral treaties, if you don't have that clearly fixed.

We have a problem, and it has to be fixed. The G-8 offers one of the best opportunities yet to get some momentum going forward to fix that problem. I'm hoping that Canada is going to support those efforts.

[Murray Rankin, NDP, Victoria, BC]

Monsieur Deneault, do you have any comments on the use of shell corporations in this context?

[Alain Deneault]

Exactly.

My answer is in the same vein. Tax information exchange agreements stipulate that information is disclosed only if it is collected. If you read the legislation on trust creation in Hong Kong, you will realize that we will not be getting any information under that agreement because Hong Kong does not collect it. In terms of politics, the message Canada is sending is very bad because the international community is currently trying to establish a balance of power with tax havens to force them to make some basic progress in the area of access to information and tax leaks.

This bill gives us the impression that we have some tools, when the tool box is actually empty. So we have entered the realm of illusion and hoaxes. It would really be better to have nothing at all, instead of having an illusion of a tool box, as is currently the case with Bill S-17 when it comes to Hong Kong.

[Murray Rankin, NDP, Victoria, BC]

I note that in the current issue of National, the journal of the Canadian Bar Association, there is an article on shell companies by Marc-André Séguin. He says that Canada is one of the “two most lax jurisdictions in the world when it comes to the rules for preventing the incorporation of anonymous shell companies”.

As a consequence, Mr. Howlett, if that is accurate, how does that factor into your analysis?

[Dennis Howlett]

This is fairly recent research that has been done, and I think it does point out what should be of concern to all of us.

This is of concern, as I pointed out before, not only for tax evasion but also for money laundering, organized crime, financing terrorism, and so on. Even if the Canadian government has tightened up, in the recent budget, the reporting requirements of financial institutions—which is a step forward, and I support that—this new research points out that there are other glaring areas that need to be addressed if we're going to get a handle on this situation.

It's difficult, though, for one country to just set up its own system. What is preferable is a multilateral agreement about a new international global standard on beneficial ownership to tighten up on the rules of corporate registration and prevent shell companies, or trusts where it's not clear who the ultimate owner is.

I think what is being proposed at the G-8, which obviously is going to need to be followed up, is the route forward on addressing this problem.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Rankin.

I'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

We've talked an awful lot outside the scope of Bill S-17. Mr. Howlett has in particular.

You continue to talk about G-8, Mr. Howlett, and you speculate as to what may or may not occur. I always enjoy listening to you. I particularly enjoy when you make reference to my policing background, as you did with regard to search warrants. But one thing I might say is that when we receive information that leads to a search warrant, it's not obviously public, but it is recorded information, as far as informants go.

So as you sit here today and refer to, you know, “I've heard people in the U.S. say”, or “I've heard other countries say this about what Canada's proposing to do at G-8”, I take issue with it, because you haven't divulged who said this.

To be very frank with you, it's somewhat selective listening, so I'd like you to hear once again what the Prime Minister himself said about the G-8, which you haven't referenced. You have referenced people you haven't identified, but here in fact is what the Prime Minister of Canada said just yesterday.

The question by the reporter was about the fact that combatting international tax evasion would be one of the main themes discussed at the G-8 summit, with two key issues: the public registry on beneficial ownership and the automatic tax information-sharing agreements. The reporter asked the Prime Minister to give his thoughts or reservations, if any, on either of these two particular issues.

Here's what the Right Hon. Stephen Harper had to say about those two things, which you've talked about at great length here today, sir, without ever referencing this.

Here's what he said, and of course I'm reading from the transcript:

We’re very supportive of all three Ts of Prime Minister Cameron’s agenda.

The three Ts, of course, as everyone knows, are tax, trade, and transparency.

He goes on to say:

You know, tax evasion, there’s no upside to tax evasion. It’s bad policy, it’s bad politics, and governments lose revenue that governments should be getting.

He continued that we obviously believe in low tax rates in Canada, but that people need to pay the tax rates that we actually have. He added:

The only reservation we will obviously express is that in terms of implementation in Canada, we’re going to have to consult with our provinces because we are a federal state and they have taxation powers.

....It is important that we do it and that we do it together because when we’re dealing with tax evasion, we’re dealing with problems that cross borders. Even the most powerful governments of the world can’t deal with these things by themselves so I look forward to being part of the declaration and to making progress on this as we leave the summit.

I hear Mr. Rankin asking whether or not I have a question for him.

My intervention is basically to correct the record, sir, because you have mentioned absolutely nothing about what the Prime Minister of Canada has said. He has clearly said he intends to address the things that you question whether or not he intends to address.

So I think it's beneficial for Canadians to hear exactly what the Prime Minister of Canada has said, and to ask you, sir, to please divulge who these informants are that you continue to say have said he will not address it.

[Dennis Howlett]

I did earlier acknowledge that I heard that there seems to be some movement forward from Canadians' position—

[Shelly Glover, Conservative, Saint Boniface, MB]

From who? Who said this?

[Dennis Howlett]

Well, from hearing the Prime Minister speak. I did look at that video last night—

[Shelly Glover, Conservative, Saint Boniface, MB]

You're saying the Prime Minister said what you said earlier? You told me it was from the U.S.

[Dennis Howlett]

No, the transcript that you just read I viewed online. I am encouraged by that. I think that does indicate some movement forward.

That was not, though, the position I was hearing a week ago—

[Shelly Glover, Conservative, Saint Boniface, MB]

From who?

[Dennis Howlett]

—when I talked to not only British NGO sources and U.S. NGO sources, including Global Witness, which is one of the British NGOs, but I also confirmed that by talking to certain Canadian finance department officials in the G-8 team, which—

[Shelly Glover, Conservative, Saint Boniface, MB]

I'm simply asking who, sir? Please name names, if we're really going to get to the crux of it, because otherwise it appears as if you really are evading.

[Dennis Howlett]

Well, the information I was able to gain from talking not only to British NGO staff, who were in direct touch with the British treasury—

[Shelly Glover, Conservative, Saint Boniface, MB]

Name them.

[Dennis Howlett]

That's a second.... I don't know who their sources are in the British government—

[Shelly Glover, Conservative, Saint Boniface, MB]

Ah.

[Dennis Howlett]

—but I put that together with what I was hearing from Canadian journalists as well.

The bottom line is that I do recognize that there seems to be some forward movement in Canada's position. I am pleased to see that, and I'm hoping that tomorrow we will learn if that is the case.

Now, there are two areas where we're still concerned. If Canada is supporting automatic information exchange, will they also support that being available for developing countries as well?

One of the concerns is that the G-8 or the OECD may limit access to that information only to the members of the G-8. That won't help the poorest countries, which are also hurting because of so much money fleeing from their countries due to tax havens.

So I'm hoping that it will be the full proposal put forward by the British Prime Minister that Canada is supporting.

[The Chair, Conservative, James Rajotte]

There are two Conservative rounds. You're now into the second one. You have about four minutes.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. I would like to go back to the questions.

As I say, Mr. Howlett, I'm not asking you these questions to be malicious in any way, but when you make statements to members of Parliament, when you make statements that are going to be on the national news, and when you make statements contradicting what the Prime Minister of Canada himself has said, I would expect that you would provide evidence for that.

I certainly wouldn't be able to get a search warrant without providing evidence that these things were said, so I would ask you once again, sir—although it appears that you don't have the names with you—to divulge these informants' names. You can submit that to the committee at your leisure, in a timely fashion, but I want to make it very clear that when it comes to this committee, we really do want to base our decisions on fact.

I have had conversations with all members of this committee about this tax convention, which is what we're supposed to be discussing today, and we all seem to be in agreement that it is a move forward. But to use the tax convention discussion to bring up the G-8 and to speculate based on absolutely no evidence, I think is unfortunate.

I think Canadians needed to hear that you're really basing your information on journalists who, quite frankly, sometimes get it wrong. You would agree with that, would you not?