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.
Conservative
Michael Cooper Conservative St. Albert—Sturgeon River, AB
Okay.
We have a Prime Minister, whose answer to everything is, “All of my assets are in a blind trust, so everything is okay.” Now, based on your testimony, that isn't sufficient, but there's an even bigger problem, because the Prime Minister set up three multi-billion dollar investment funds, which he registered in Bermuda and the Cayman Islands. The Prime Minister is entitled to something called “carried interest pay”. That's, essentially, future bonus pay based upon the performance of those funds.
The Prime Minister picked the companies. He knows what the holdings of these funds are. He's disclosed the three funds, but he has not disclosed what the holdings are in these funds. Therefore, the Prime Minister is not being transparent about potential conflicts of interest.
Would you concur that, even if the Prime Minister isn't technically, by law, under the Conflict of Interest Act, required to disclose the holdings of those funds that he set up, in the interest of transparency, he should?
Lead Researcher, Beneficial Ownership, Tax Justice Network
I understand that people will usually abide by whatever laws they have to comply with. Again, of course, a prime minister or public official has a higher responsibility and is a higher role model. I would still expect any citizen, especially high-level individuals, to still disclose all of the assets that they have.
I do not think that a blind trust can create enough safeguards to ensure that no problems will be there. It's much better for, at least, authorities to know exactly what assets are held in a trust. However, in the case of a prime minister or another public officer, ideally, the full general public would know what's there, and then they can judge whether any conflict of interest is happening with a government contract or any other transaction, instead of simply having to rely blindly on what is happening.
Conservative
Michael Cooper Conservative St. Albert—Sturgeon River, AB
Now, we have a Prime Minister, who has tens of millions of dollars tied up in offshore tax havens. Technically, under the law, he can do that. As you note, the Prime Minister really ought to be held to a higher standard, as a public office holder, as the highest public office holder in the land.
In your view, should the Conflict of Interest Act be amended to prevent public office holders from using tax havens? Does that, to you, seem like something that would make sense?
Lead Researcher, Beneficial Ownership, Tax Justice Network
Again, as I said earlier, I feel like the biggest concern is what is defined in the country as a tax haven. If you're only covering, maybe, small islands, they can still be using major financial centres that might not be considered a tax haven by Canada but can create just as many risks as a small island. Again, I would expect that to be used for everyone. That's standard of course for a public officer, but for anyone there would be a disclosure. Some countries have chosen for full prohibition of going for a tax haven.
Another alternative would be to explain why exactly you need to go to a tax haven, why only a tax haven would offer you something. Is the reason just to reduce their taxes or escape other laws that would apply in Canada to anyone else, or is there a good reason that is not about reducing taxes or escaping any law? Maybe there is one. I can't imagine one, but maybe they have a reason.
Conservative
The Chair Conservative John Brassard
Thank you, Mr. Knobel.
Mr. Knobel, the interpreters are having trouble with your microphone. I'm wondering if you could bring it a little bit closer to your mouth and lift it up.
Can you give us a test before we begin? Maybe tell us what the weather is like where you are.
Lead Researcher, Beneficial Ownership, Tax Justice Network
It's quite cold here, despite being spring already.
Is that better?
Conservative
The Chair Conservative John Brassard
They say no.
Perhaps you can unplug it, sir, and plug it back in. We've had success on that with some witnesses in the past.
Lead Researcher, Beneficial Ownership, Tax Justice Network
Can you hear me now?
Conservative
The Chair Conservative John Brassard
It's up to the interpreters, but that sounds a lot better. Keep going, please, if you don't mind.
It also might help if you could talk a bit more slowly in some of your responses. It's easy to get worked up about taxes and offshore tax havens—Ms. Christians doesn't like that term, I know—but if you could talk a little bit more slowly, that might help.
Ms. Lapointe, you have the floor for five minutes.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you, Mr. Chair.
I also want to thank you, dear witnesses, for being here today. Each of you has a different area of expertise, which is very interesting.
My question is for you both.
Is Canada doing enough to combat tax avoidance? Also, can you provide any information on pillar two of the global minimum tax?
Ms. Christians, could you answer my question first, please?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Is Canada doing enough to prevent tax avoidance? I think you mean, is Parliament doing enough?
Is Parliament doing enough? That's a question of what's in the Income Tax Act. You have anti-avoidance rules and you have a general anti-avoidance rule. You have to remember that the courts get involved, because they're interpreting the tax law. The courts are involved in interpreting what the anti-tax abuse rule does in practice. It's a conversation between the legislation and the courts.
“Enough” is not the right characterization. It's just a question of whether those tools are in place. They are in place. Those decisions have to be made between the courts and Parliament. We can see a back and forth. Parliament has revised the general anti-avoidance rule many times after the courts' decisions.
Is Canada doing enough? The question is, are the laws perfect? No, they're never perfect. Tax laws are never perfect. Parliament every year is revisiting how to make the tax law better or more applicable to current circumstances.
You asked me about pillar two. Is Canada doing enough there? Canada is a member of the OECD. Canada has been a leading influence, if influence is the right word, or a leading voice in the discussions internationally as far as that global minimum corporate tax goes, but Canada does not control the global economy. The United States changed their position earlier this year, as you may know. The United States put enormous pressure on that global minimum tax. In fact, the United States may well have unravelled the global corporate minimum tax.
All Canada can do is control what Canada can control, which is to build its own internal systems. All the tools are there. They're in the Income Tax Act. By the way, they're in tax information-sharing agreements. Again, I would just point to not being sure about the language here, but we need to be clear that Canada has agreements with these jurisdictions for information sharing. That's not the same problem as profit shifting. Profit shifting is not an information problem, largely. It is not about hiding information. Profit shifting is about tax competition. That is a global phenomenon and one that is inescapable. That does not end, ever.
Is Canada doing enough? Canada is working in the context of a global situation that it does not control and cannot control. The best I can say is that this is a constant conversation between Parliament, the courts and the leaders of the country who sign those agreements and try to get those international negotiations to yield fruit.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Thank you.
Before moving on to Mr. Knobel's answer, I have another question for you, Ms. Christians.
What difficulties do you foresee in attempting to legislate on the issues my colleague mentioned earlier regarding tax havens in the context of blind trusts?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
Again, speaking only about the Income Tax Act, I don't have in front of me a problem to be solved here. Things are disclosed, and the rules are to disclose. If people do not hide information fraudulently, then they're in compliance with the disclosure rules. If there's not enough information to be disclosed, then Parliament can change the rules to require more disclosure, of course—always, right?
I'm not sure how to answer that question other than to say that information flow is something that is very sophisticated in the Income Tax Act. It involves a web of agreements. We are furnishing information, millions of bytes of data, of information, to other countries, and they are furnishing us information. There is not a lot of secrecy left to be had. That's intentional and took many decades to develop. That required the co-operation of other jurisdictions and it required political consensus across nations, and it's in place. That's just where it's at with information gathering.
As far as the blind trust goes, that is just not an issue for me in the Income Tax Act. You're talking about conflicts of interest, I understand. That is just not an area of my expertise. I'm sorry. I can't give you an answer on that.
Liberal
Linda Lapointe Liberal Rivière-des-Mille-Îles, QC
Maybe my colleague will get to Mr. Knobel.
Thank you.
Conservative
The Chair Conservative John Brassard
Maybe.
Mr. Thériault, you only have two and a half minutes today.
Bloc
Luc Thériault Bloc Montcalm, QC
I'm feeling a bit constrained.
At the same time, it's a bit contradictory, because the expertise of our witnesses and the questions I have for them are more related to the Conflict of Interest Act.
There are certain problems we're trying to resolve.
The Conflict of Interest Act only considers personal interest in determining whether there is a conflict of interest. However, some people are saying that we should be mindful of decisions that are general in scope but could give rise to a conflict of interest. Let me give you an example.
We know that Canada loses between $15 billion and $30 billion a year because of tax havens, and that the use of tax havens is on the rise. Witnesses have described Brookfield as the champion of tax avoidance. Our Prime Minister used to run that company. Can we expect a Liberal government to embrace legislation on tax avoidance, given that our Prime Minister comes from the private sector and has interests in this company and in the way he has made it grow?
This is just one example of a conflict of interest in a decision that has broad implications. These are questions that are worth asking.
When, for example, the Prime Minister moved the company's headquarters to New York and, at the G7 summit, decided to exempt U.S. companies from paying the 15% minimum tax, doesn't that raise an issue that we should at least be discussing? Should we be concerned about this? Should we at least try to assess whether this is responsible? These are the kinds of questions we are asking ourselves.
Mr. Knobel, what do you think about what I'm describing? Should we indeed look into this issue, and are we right to be concerned?
Conservative
The Chair Conservative John Brassard
Mr. Knobel, I'm going to give you about 45 seconds to answer that, if you don't mind, sir.
Lead Researcher, Beneficial Ownership, Tax Justice Network
Hopefully, this idea of more transparency and especially some kind of alert system—even to say that this law might affect the interests of a prime minister or any other public officer and alert citizens—I think that would be the best thing. They should know that there might be a potential conflict of interest and at least have public outrage articles or requirements to change things. I think transparency is the only way to achieve that and really hold governments to account and make sure they are really serving the country and not just their own interests.
Conservative
The Chair Conservative John Brassard
Thank you, Mr. Knobel.
Thank you, Mr. Thériault.
Mr. Hardy, you have five minutes.
Conservative
Gabriel Hardy Conservative Montmorency—Charlevoix, QC
Thank you, Mr. Chair.
My question is for Ms. Christians.
You referred many times to the blurred line between tax avoidance, legal tax evasion, and tax evasion, which was described as abusive earlier.
In your opinion, are large multinational companies that use complex processes to engage in tax avoidance, and even abusive tax avoidance, betraying the country in which they make their profits? Are they not paying their fair share of taxes?
I will conclude my question by asking you this: Is $6.5 billion over five years abusive, in your opinion?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
I didn't catch the last part about the $6.5 billion. I'm sorry. I didn't hear the point.
Conservative
Gabriel Hardy Conservative Montmorency—Charlevoix, QC
Is the non-payment of $6.5 billion in taxes over five years abusive, in your opinion?
Full Professor, H. Heward Stikeman Chair in Tax Law, McGill University, As an Individual
I don't know what you're talking about, so I'm not able to answer that question, unfortunately.
I will say that Parliament defines avoidance and abuse very carefully in the Income Tax Act. The courts have to interpret those rules, and every taxpayer has to live with those rules. It's really Parliament's prerogative to say what the rules are, and it's Parliament's duty to tell the taxpayers what the rules are so that we can ask—