Evidence of meeting #81 for Finance in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was havens.
A recording is available from Parliament.
12:30 p.m.
Conservative
The Chair Conservative Brian Pallister
Thank you, Sir.
To continue now, we'll go to Mr. Pacetti, for three minutes.
12:30 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chairman.
Let me continue my line of questioning from when I was asking about the additional resources and what they can be used for. I think, Mr. O'Riordan, you had an answer for me regarding what the CRA can do with the additional resources.
12:30 p.m.
Director General, Compliance Program Branch, Canada Revenue Agency
What I was saying is that most of the resources find their way into field audit work. That's really where we find that the greatest return on the investment is.
Having said that, Brian is chiding me a little bit about where else in the agency those resources could go. Obviously there is a funding formula for any additional resource, and so it's not just to our function, the audit function in the field. It goes to Justice for advice; it goes to Justice for litigation, to assist us in court; it goes to appeals; and so on. But the lion's share of the money, once it's allocated for that purpose, does go to additional audit, either to direct audit in the field or to the centres of expertise, where they engage in activities that have an effect of increasing the effectiveness of the audit work across the country.
12:30 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
So you're comfortable that it will have an effective tax collection aspect. It will increase our collection by increasing the resources.
12:30 p.m.
Director General, Compliance Program Branch, Canada Revenue Agency
Absolutely.
12:30 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Mr. McCauley, I think you had some suggestions we could make to help your organization to better collect more revenues.
12:30 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Yes, and we may reflect more on this as well and provide additional information to the committee.
Certainly one of the areas of focus through the centres of expertise and others is our work internationally in business intelligence and some of the...I'll call them the inputs into the risk analysis and the targeting that we do. We have been working quite diligently with the OECD and other organizations. That's where, as well, some of those resources go. Basically, if we understand the problem and we can get ahead of it, then we can do a better job.
12:30 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
I have a quick question.
Because we're sort of legitimizing the fact that big corporations can do business with Barbados and then it goes into the surplus account, and then the Canadian companies can repatriate the income back tax-free per se, are most Canadian corporations taking advantage of the tax treaty that we have in Barbados, or are there still Canadian companies using other tax havens that are not necessarily recognized for Canadian companies?
12:30 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I don't know that we know the answer to that, but certainly Barbados does not have any exclusive privilege when it comes to tax havens.
12:30 p.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Mr. Adams, I have just a quick question.
With the chart that you gave us, you're able to see the whole corporate structure. When you're taking big companies or corporations to court over items like this, do you get to see the whole corporate structure, or are there some corporate structures that are not cooperating in terms of giving you information around those tax havens?
12:30 p.m.
Director General, Income Tax Rulings Directorate, Policy and Planning Branch, Canada Revenue Agency
I would think that we have a better than reasonable understanding of the corporate structure. We have powers to compel them to produce information. There are rules that if they don't produce the information when we ask for it, they can't use it to defend themselves in court. Also, in an examination for discovery that precedes the actual hearing of the trial, they're compelled by an officer of the court to respond to our requests for explanations and/or documents.
I think it steps over the line when they're deliberately hiding documents. You move into the realm of evasion then. Avoidance really is that the books are open, they think their strategy works, and they invite the discussion. It doesn't have the attributes of criminal or hidden documents.
12:35 p.m.
Conservative
The Chair Conservative Brian Pallister
Thank you very much, Sir.
In response to Mr. Pacetti's inquiry about other tax jurisdictions, I believe in our notes that were supplied to committee members there is reference to three jurisdictions that have preferential tax regimes: Barbados, Cypress, and Malta, which have been listed as tax havens by the OECD. It would be a surprise if those three jurisdictions weren't very appealing to certain tax practices, would it not?
12:35 p.m.
Director General, Income Tax Rulings Directorate, Policy and Planning Branch, Canada Revenue Agency
They are attractive for the particular income taxation model they have. There are aspects to Malta that are attractive, but there are aspects to other countries that have incentives in place. Ireland is still a country that attracts a certain amount of global investment because they have low tax rates. I don't think it would be fair to point to just a small group, but there's no doubt that they are attractive.
12:35 p.m.
Conservative
The Chair Conservative Brian Pallister
I know, but you're not suggesting that the OECD is somehow being unfair by listing them as tax havens, are you?
12:35 p.m.
Director General, Income Tax Rulings Directorate, Policy and Planning Branch, Canada Revenue Agency
I'm not suggesting they are unfair, no.
12:35 p.m.
Conservative
The Chair Conservative Brian Pallister
Oh, good. I just want to be clear on that.
Madame Wasylycia-Leis, for three minutes.
12:35 p.m.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
My question was on Barbados as well, because in fact in the past this has been a focus of considerable debate in Parliament. The Liberals closed a considerable number of tax havens but left Barbados and a couple of others. The Conservatives have identified this as a concern and promised to shut down the Barbados tax haven. It's clearly a lucrative place to go. If Merck Frosst puts $2 billion into Barbados to avoid paying taxes, it means we've left something undone. There is unfinished business.
In the past, when the Liberals were in government, John McKay tried to give me an explanation of why Barbados must stay as a tax haven. Other than the fact that this was the favoured place for Canada Steamship Lines, I don't know of an explanation.
So can you tell us why particularly Barbados has been excluded from the list of tax havens that were shut down?
12:35 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
Actually, no. We administer those decisions, and probably the reason member McKay, when he was Parliamentary Secretary to the Minister of Finance, would have tried to give that answer is that it properly comes from the Department of Finance, who are responsible for—
12:35 p.m.
NDP
Judy Wasylycia-Leis NDP Winnipeg North, MB
Can you give us any reason from a revenue point of view why Barbados has been left untouched vis-à-vis all the other places that were shut down as tax havens by the Liberal government?
12:35 p.m.
Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency
I wouldn't have a view on that. I don't know.
12:35 p.m.
Acting Assistant Commissioner, Compliance Program Branch, Canada Revenue Agency
I think the only thing we can say is that as a revenue administration, we administer the tax laws and the tax treaties with other countries, including the treaty with Barbados, as approved by Parliament. Treaties are a matter of tax policy. They are the responsibility of the Department of Finance. If you go to the Department of Finance website, I believe you'll see the 86 that are in force. They have a number of others that have been negotiated and are not quite in force yet, and they also have a number of others that are under negotiation or re-negotiation, and I think Barbados is listed in that category.
12:35 p.m.
Conservative
The Chair Conservative Brian Pallister
That will be for persons taking the fifth, I think, Mr. Kowalski.
We have two more questioners, Mr. McKay and then Madam Ablonczy.
Mr. McKay.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Obviously the explanation for Ms. Wasylycia-Leis didn't work. There's always some question as to whether Ms. Wasylycia-Leis actually understands the question or the answer.
Now, second, the first issue—
12:35 p.m.
Conservative
The Chair Conservative Brian Pallister
Your time is almost up. I would urge you to ask your question.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you very much. I appreciate that guidance, Chair.
The first issue is, do you have a handle on how much money we're talking about here? Did you give Finance any advice as to how much money this so-called double-dipping structure actually involves?