Finance Committee on May 8th, 2007

[Brian McCauley]

No.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Okay. So Finance didn't actually ask you.

[Brian McCauley]

Just to clarify, we give information on cases and files and what we're doing, and they have access to that under the Income Tax Act. But we did not get into and provide Finance with estimates of the impact.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So Revenue has not told Finance what the global impact of this kind of structure is on the revenues of the nation. Okay.

The second issue is that, as I understand it, on the files that go to court you essentially are at a standstill—it's basically six for them, six for you—and there is benefit that generates from your effort. If in fact you put more money into it, you actually do generate more revenues for the treasury.

Is that a fair statement? It seems to be your evidence.

You don't know how much. There is no real issue of right or wrong. These are tax schemes that virtually every corporation in Canada with any international operation sets up, so you'd pretty well include all of the financial sector, all of the banks, all of the trust companies, all of the resource companies, etc. These are structures that are used on a regular basis in order for Canadian companies to be competitive.

Is that a fair statement?

[Wayne Adams]

I don't know whether it would be fair for us to comment on whether it is a way to remain competitive globally, but if I may indulge, when you talk about our being at a standstill, there are several hundred avoidance assessments raised each year, and most of those are accepted by the taxpayers.

The fact that it is expensive to go to court and that we win 50% of the time, I believe, both reinforces the merits of the efforts of John and Fred's area and also deters people from litigating in court.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I think that's actually a fair statement, because what happens outside of court is probably as important, if not more important, than the actual cases you litigate.

A final point is that we, as a committee, are trying to recommend something to the minister, and you folks look at this on a day-to-day basis. What is it in the legislation that at this point is inadequate and, if fixed, would still leave us in a competitive position vis-à-vis other nations?

There has to be some fix. David Dodge didn't seem to think there was one, but I'd be interested in your opinion.

[Brian McCauley]

We don't provide public comment on legislative or policy changes. We leave that to the Minister of Finance.

[John McKay, Liberal, Scarborough—Guildwood, ON]

But do you internally have that opinion, and have you shared it with the finance minister?

[Brian McCauley]

We have regular contacts, obviously, with the department and with Finance officials on a whole range of issues. They sit on the GAAR committee with Wayne, so Finance would certainly be well aware of our views and opinions on cases and the difficulties we have. In fact, they're in there with us, as Wayne was saying.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I think the emphasis is on difficulties.

[The Chair, Conservative, Brian Pallister]

Although the competitiveness point Mr. McKay raises obviously requires a subjective evaluation, it's fair to say that the principal purpose is to reduce the tax obligation. I think that's prima facie, right? To reduce the tax obligation is why the money's flowing there, correct? It would follow, then, that a way to address this would be to reduce the corporate tax rate. Wouldn't it be a fair assumption that the balance between...? Actually, I think you said in response to the Auditor General's previous comments at various times--and the finance department has as well--that it's the slope of the high tax rate in our jurisdiction relative to others that causes the flow of capital to the low-tax jurisdiction.

Isn't that a fair observation?

[Wayne Adams]

It certainly is one. I think it is a complex set of factors, though, that causes a country to reflect on its domestic tax policy vis-à-vis trade partners and trade competitors. I think it's just one aspect.

[The Chair, Conservative, Brian Pallister]

Sure, good, and we're forced to deal with that one aspect. But we shouldn't isolate it from all the others, of course.

Madam Ablonczy is next.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Mr. Chairman, I'd like to switch the channel a little bit.

We've been talking about corporate tax avoidance, but it's come to my attention that there are grassroots tax avoidance schemes. One was in the media last week, I think; donations were funnelled through a particular church group, and it turned out not to be a legitimate arrangement.

Another one came to my attention. It was, again, donations to a charity. Participants were largely people of faith. The result was that families paid no tax, actually. Then there was another one that came to my attention through a colleague, another sort of charitable arrangement, which I got an opinion on through the department.

If I have recently come to know of three of these kinds of arrangements, there seems to be a proliferation of these tax avoidance schemes through good, well-intentioned charitable donations. How do you try to advise taxpayers not to get caught up in these schemes?

These are good people. They're well-meaning people. They've been told these are legitimate schemes. Do you just wait and nail them after the fact, or are you proactive in trying to get them not to get involved in the first place?

[John Kowalski]

Thank you for the question.

We're certainly trying to be proactive in this regard. Over the last five or six years at least, we've been issuing tax alerts and news releases on the Internet site, trying to alert investors and Canadians across the country to the risks and pitfalls engendered in these particular kinds of donation arrangements. We have been trying to advise them to be prudent, to take care, to seek independent financial advice, and to challenge certain assumptions that they're being faced with.

One of our latest releases talked about the actual numbers of audits we've done, the number of investors who have been caught by these kinds of schemes, the amounts of money that have been reassessed, and this type of thing. We'll certainly look to do more in this regard, but we have been trying to be proactive in letting people know about those schemes.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Have you had strategic discussions about how to deal with it--maybe some advertising, or a notice with the tax forms? I'm actually really quite worried about this.

[Brian McCauley]

So are we. Actually, in February and March we did run an advertising campaign that was close to $300,000, specifically advising Canadians about where to go for information on donations and how to make themselves more aware. We developed a series of calendars reaching out to senior citizens and others in order to warn them. That was in cooperation with the provinces, and we shared the funding. We also ran and provided a series of brochures targeted at new Canadians and other languages so that those communities were also aware.

We are concerned. We've been stepping it up, and we now have a partnership arrangement with a number of large umbrella associations and charities in the voluntary sector to continue to focus on the information and awareness at the front end. We're actually being very aggressive, both on what I'll call the auditing side and also at the front end. We are concerned about it.

[The Chair, Conservative, Brian Pallister]

Thank you, Ms. Ablonczy and Mr. McCauley. Thank you all.

Gentlemen, we appreciate your time today very much. As you could tell by the response, committee members are very interested in your expertise. We appreciate your being here. You're excused.

We'll now move to some motions, but we have a housekeeping issue first. We'll deal with that very quickly, I hope, and then move to Madam Wasylycia-Leis's motion.

Go ahead, Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

From my understanding, we have a visit from a senior parliamentary delegation from Pakistan. I move that the Standing Committee on Finance host a luncheon with a senior parliamentary delegation from Pakistan in Ottawa, accompanied by the Deputy Speaker of the National Assembly, Sardar Muhammad Yaqoob, on Wednesday, May 16, 2007.

We're going to organize a luncheon, from what I understand.

(Motion agreed to)

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Perhaps I can add to that. People who are going to attend the luncheon from this committee, you're all invited to do so, but please confirm with Elizabeth, because we are going to have to pay for lunch. If you say you're going to attend, please attend. Okay?

That's it. Thank you.

Everybody from the committee is invited.

[The Chair, Conservative, Brian Pallister]

When Massimo says “we”, he means the committee.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Yes.

[The Chair, Conservative, Brian Pallister]

Good. Thank you.

Madam Wasylycia-Leis, over to you.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you.

I gave notice of the motion. You have it before you. I will not read the motion, since I assume everyone has copies.

It is based on the hearings that we held with respect to ATMs and electronic payments. It requires this committee to request some information from the major chartered banks regarding costs of providing service through ATMs, the fees involved and the profits entailed. So it is a basic motion and request that this information be provided to this committee by the end of May, and that then be considered by this committee in terms of its further deliberation on the study and a report to Parliament.

Just by way of elaboration, let me say the following. First of all, the motion that was originally adopted by this committee called for a study. It didn't call for a set of hearings and to hear some witnesses. A study has usually been meant by this committee to mean a beginning, a middle, and an end.

I know that because it didn't technically raise the suggestion that this committee report back or have a concluding statement and a report to Parliament on our study, some members of this committee have felt it advantageous to try to ignore any further deliberations on this matter. But I want the committee to know that in fact it is not uncommon for motions to come before this committee calling for a study, and it's not uncommon, then, for the committee to conclude its deliberations. Having tested this at the steering committee last week, around which we didn't have a final discussion or conclusion, it was my feeling that I had to make sure that our motion entailed that concern.

So I have tried in this motion to deal with a very important outstanding concern, which is that of all of our witnesses, except for the big banks, suggesting this committee do its work and get information about the fees of ATMs, the costs involved, and the profits that follow. That, of course, Mr. Chairperson, you will know came from every organization, including the Canadian Consumer Initiative, the Community Coalition for Reinvestment, the Option consommateurs, and our economist Mr. Lew Johnson. Even the Consumers Association of Canada, I might add, felt that the least this committee could do would be to get the information and then make further determination about what we do with the information and how we take this issue further.

The motion does not suggest that we breach confidentiality, it does not specify that banks make this information publicly wide open. There are ways that we can receive the information and deal with it that won't breach confidentiality, so I hope the committee members won't use that excuse as a way to defeat this motion.

I will just conclude, Mr. Chairperson, by saying that I think it's imperative for us to do everything we can to convince the banks to follow some basic standards of transparency and accountability. So when it comes to asking for information around ATM fees, I should think, Mr. Chairperson, we don't want to just accept the tired rhetoric of the banks, who say they can't possibly provide this to us, and roll over and play dead. I hope that we will at least ask for the information and then see where it takes us.

[The Chair, Conservative, Brian Pallister]

Thank you.

Madam Wasylycia-Leis has a motion that is very straightforward, committee members. In the interests of time, I would appreciate it if members would keep their comments specifically to the motion, and brief.

Mr. St-Cyr.