Evidence of meeting #12 for Access to Information, Privacy and Ethics in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was income.
A recording is available from Parliament.
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Again, I can't speak to the Conflict of Interest Act. I can only speak to the Income Tax Act, and what I will say is that information is reported, and if it is reported, it is not illegal. It is not hidden. There is nothing hidden.
Liberal
Abdelhaq Sari Liberal Bourassa, QC
That's exactly what I wanted to know, so thank you for that information.
Furthermore, if a beneficiary isn't aware of the composition of the assets, can they influence decisions?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
If I understood the question correctly, you're asking me whether a beneficiary can manage assets in a trust if they don't know what the assets are. That is beyond my expertise. I can only tell you what the Income Tax Act rules require in terms of disclosure of such information.
Liberal
Abdelhaq Sari Liberal Bourassa, QC
Very well, let's stay on the tax issue then. You've written extensively on the growing complexity of tax and financial systems.
Given the technical nature of these issues, is it beneficial for governments to be able to rely on people with solid expertise in the private or financial sector?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Okay, that's fine. The interpreter had a little trouble with that question. I think I understood the gist of it, which is, is it okay that things are so complex in the Income Tax Act? What I will say is, is it okay that the economy is as complex as it is?
The Income Tax Act is not making up the complexity; it's responding to it, so Parliament has to stay on top of whatever the latest financial innovations are. My colleague mentioned cryptocurrencies, for example. That's a problem, so if you don't know how to manage that, you have to have a committee and talk about how to legislate, how to regulate, and you have to think about the purpose of that regulation.
In the Income Tax Act, the purpose of regulating is to raise taxes. Of course, we have complexity in the administration of a system that is trying to capture something which itself is complex. The more complex the instruments, the more complex the entities, the more complex the transactions, then the more complex the law.
I hope that answers your question, and I am sorry, if it does not.
Liberal
Abdelhaq Sari Liberal Bourassa, QC
That was great, thank you.
As part of our study on conflicts of interest, we're trying to improve things a little. As other witnesses said two days ago, Canada's conflict of interest management system is among the best in the world, but it's not perfect. It must be improved on an ongoing and continuous basis.
So, do you have any advice for us on how to make reasonable improvements to our conflict of interest management system?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Yes, I do think the advice brought up in 2013 and again in 2018 is probably right. That is, you need to look through ownership structures. I think my colleague also suggested that. You need to have some sort of indirect ownership. It's possible that there is some understanding of that, but I can see that becoming a more robust definition. Again, it's family, friends and relatives, but you have to understand who has the beneficial ownership of things. That's a complex thing to do when ownership itself is complicated. I would say that's a good place to put energy.
Liberal
Abdelhaq Sari Liberal Bourassa, QC
I always talk about the importance of attracting people with expertise. Personally, that's a goal I place a great deal of value on.
Do you think that changes in ethical standards could undermine the goal of attracting people with the right skills?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
I'm not at all qualified to answer that question.
I do understand—I've heard that question before—and will say that the OECD guidelines on conduct of public officials is pretty clear. You can never get rid of conflicts of interest. We all have personal conflicts of interest. We're human. You can only manage them. I do not think we can be perfect. I do not believe perfection is the goal. I believe holding public officials to account is the goal.
The Income Tax Act is holding people to account for their financial transactions. Where those overlap, there are lessons to be learned in the Income Tax Act.
Conservative
The Chair Conservative John Brassard
Thank you, Ms. Christians.
Mr. Sari, I extended your time a bit because the witness didn't understand your first question.
Mr. Thériault, you have six minutes.
Bloc
Luc Thériault Bloc Montcalm, QC
Mr. Chair, before my speaking time begins to be counted, I'd like to say something to the interpreters.
We're talking about a technical subject here. Tax evasion is illegal, and tax avoidance is legal. I'd like the interpretation to reflect that, otherwise the witnesses won't understand what I'm talking about.
First, I would like to welcome the witnesses and thank them for enlightening us in our difficult task. It is indeed a difficult task. The world is changing, and we are tasked with reviewing the Conflict of Interest Act.
It is important for me to say that one of the pillars of my political commitment is to restore ethics in politics rather than engage in petty partisan politics. I want to say this because when I refer to a specific case during my questions, it is not to personalize an issue, but to identify a specific case in order to see whether the act needs to be amended.
Ethics therefore involves analyzing what is in terms of what should be. That's why it is often said that ethics are more demanding than the law, and that just because something is legal does not mean it is moral. I think that ties in with your point of view.
When I asked the former clerk of the Privy Council whether he considered tax avoidance to be moral, he immediately asked me how my question was relevant to the Conflict of Interest Act. I replied that it was indeed relevant.
Mr. Knobel, Alain Deneault wrote that tax havens are legal because a caste of legislators, judges and parties have set up the system to their own advantage.
What do you think about that?
Lead Researcher, Beneficial Ownership, Tax Justice Network
I would agree that many people benefit from tax havens, and I think that is quite unfair. If it's legal or illegal, that might be up to different countries. Some countries do make it illegal to have transactions or assets in tax havens, and others don't.
The idea that some individuals, some citizens and some companies—usually large companies and high net worth individuals, when compared to lower income individuals or small and medium companies—can escape many of the regulations that would apply to everyone else, just because they have operations, bank accounts or companies in tax havens or secrecy jurisdictions. I think that is quite unfair.
Of course, transparency is the first step, but I agree with you that countries could go much beyond that and start regulating what people can do or not in tax havens.
Again, the main issue is what you consider to be a tax haven. Many major financial centres, just because of the political pressure, would usually not be identified either on a national tax haven list or on international ones such as those maintained by the OECD, the FATF or the EU. That's why I think it's important to also use these objective criteria and then treat every country in the same way.
Bloc
Luc Thériault Bloc Montcalm, QC
One of the objectives of the study we're doing is to try to strike a balance between restoring public confidence in political institutions and the concern of the Conflict of Interest and Ethics Commissioner that the rules not be so strict that people in the private sector don't want to go into politics.
I don't agree with that view. I think we simply need to define what we believe are the criteria that must be met. It will then be up to the individual to decide whether or not to enter politics. When you go into politics—and I could talk about this all day long—there are sacrifices to be made. That doesn't mean that you have more skills or abilities because you come from the private sector. If you really want to work in the public interest, obviously, that may require putting your own interests second.
What do you think about all this?
Lead Researcher, Beneficial Ownership, Tax Justice Network
Again, I am not an expert on this issue, but my personal opinion is that, for sure, you would expect.... Of course, politics should be open to everyone, but maybe coming.... I'm based in Argentina, which is a country where maybe trust and the rule of law apply less than in other countries like Canada. I would say that politicians have a huge role in that. They are, in a way, role models. When the citizens feel like their own politicians do not respect laws, do not pay taxes, steal or even escape the law all together, that in a way gives them some kind of entitlement to do the same.
Of course Parliament and politics should be open to everyone, but I do think we should have a high standard of what to expect of politicians' conduct because that would have huge implications on how everyone else will be trusting the system and also complying with the laws themselves.
For sure, I would expect people to be subject to high standards, not to exclude anyone. I don't think being from the private sector or not should be a criteria there. It's more about how they are behaving and how compliant they are with the laws that apply to everyone else.
Bloc
Luc Thériault Bloc Montcalm, QC
I have 30 seconds left.
I wanted to ask you about what Ms. Christians mentioned earlier, namely the global minimum tax of 15%. This raised some questions in my mind about the current Prime Minister's conduct. I'll come back to this in a later question.
It seems to me that if we want to establish proper rules to restore people's confidence in politics, we will have to come up with different rules. The highest office in a state must be the highest example of transparency and integrity. I will come back to this later.
Conservative
The Chair Conservative John Brassard
Thank you, Mr. Thériault.
That concludes our first round.
We're going to our second round now. I'm going to have to stay on time here. We went a little longer on the first round on some of the questions.
Mr. Cooper, you have five minutes.
Conservative
Michael Cooper Conservative St. Albert—Sturgeon River, AB
Thank you, Mr. Chair.
Mr. Knobel, I want to go through some of your testimony to make sure that I understand it correctly.
Is it accurate that blind trust misuse is a problem?
Lead Researcher, Beneficial Ownership, Tax Justice Network
The question is whether blind trusts are a problem. Is that the question?
Conservative
Lead Researcher, Beneficial Ownership, Tax Justice Network
I would say any misuse of a company or trust is a problem. I would also personally think that blind trusts—
Conservative
Michael Cooper Conservative St. Albert—Sturgeon River, AB
Thank you for that. Therefore, I understood your testimony to be that blind trusts are not a sufficient safeguard.
Lead Researcher, Beneficial Ownership, Tax Justice Network
That's correct. Could I expand on why?
Conservative
Michael Cooper Conservative St. Albert—Sturgeon River, AB
What I understood you to say was that the best safeguard is transparency. Did I get that right?