Finance Committee on April 28th, 2009

[Thomas Mulcair, NDP, Outremont, QC]

I have about four minutes? All right.

First of all, I'm going to take the opportunity to say thank you. You've been very helpful today.

I want to spend a little bit more time with you on the question of paradis fiscaux, tax havens. You mentioned that at the G-20 meeting, the most recent one, it was an issue that came up. I know that President Sarkozy is the only one who's been pushing hard on this issue. At a conference I attended in Paris in January, he was very strong on this, as was Angela Merkel. It was a fascinating experience.

I have to share an anecdote with you. The head of the Dutch Socialist Party told a very funny anecdote about when he came in, very recently. He decided he was going to modernize his party and get rid of some really old-hat things in his party's constitution. The first thing he insisted on tearing out two years ago when he came in was this antiquated part where everybody, way back then, was talking about nationalizing banks. And of course two years later it was all the rage. So there you go. Sometimes history catches up with you.

On the question of tax havens, there is a grave concern that a lot of the money that can be there to do productive things has disappeared into these sinkholes and is being held. It has never been properly taxed and it has never been properly accounted for.

I mentioned Madoff before, in passing, and that there had been people who had seen it. I think one of the surprise aspects of Madoff is this. It's going to be like when the safety deposit boxes at Lloyds Bank in London were robbed a couple of decades ago. Not too many people said what was in them. I have a feeling it might be a little bit that way with Madoff, too. Not too many people will remember how that money got there, where it was from, and where it was supposed to go.

More seriously, there is an issue that I think legislators, regulators, and law enforcement agencies have to look at. If we're supposed to have a system that's closed, where we can account for money and we can tax it, and it can be made productive, and lots of it can be siphoned off and held in a dead box, then we have to have a way to go after it. Is that idealistic? Is that realistic? Or do you think it is something that should be on the table at more G-20 meetings and something that committees like ours should be looking at?

[Mark Carney]

I think there are a couple of aspects there.

One aspect is this issue of opacity or lack of transparency, of money being held outside the net, if you will, of taxation. Related to that is aggressive tax planning that utilizes these environments. I believe the government has taken a look at the international taxation regime for Canada, which includes the appropriate use of third countries for tax planning. I refer you to the report by Peter Godsoe that is relevant to this issue, but maybe not comprehensive for the issues you're raising.

[Thomas Mulcair, NDP, Outremont, QC]

We were a little bit concerned about the Godsoe report, though, because it actually brought us back a little bit in terms of what was allowed to be cycled through outside countries by Canadian companies, something that we thought had been shut down, that Godsoe recommended be opened up. Minister Flaherty, whom I know a little bit, especially his body language, didn't seem to be completely convinced he was doing the right thing. It seemed to be contre nature for him to be doing that, but he did it anyway. I don't want to drag you into our turf. That's too partisan; that wouldn't be fair.

But keep going on the Godsoe report, if you could--in ending.

[The Chair, Conservative, James Rajotte]

Very briefly, Mr. Carney.

[Mark Carney]

Very briefly, the point I was trying to make in the reference was that there is a tax planning element to this and a competitiveness element to this that has to be considered. Then there's the fundamental issue, which you're raising, in terms of tax evasion, effectively--which is very on point for continental Europe--through the use of banking secrecy and other mechanisms and various tax havens, which is being addressed through this.

[The Chair, Conservative, James Rajotte]

Thank you.

[Thomas Mulcair, NDP, Outremont, QC]

I just want to end on one last thing. It's all in one sentence. There is a difference between aggressive tax planning, which can be tax avoidance, which is legal, and tax evasion, which is of course illegal.

[The Chair, Conservative, James Rajotte]

Okay. Thank you, Mr. Mulcair.

We'll go to Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chairman.

Good afternoon, Mr. Carney and Mr. Jenkins. I missed your presentation because I was stuck in the House. However, I had time to read it.

At the end of your presentation, you talk about various factors on which the recovery depends and over which you don't have a lot of influence. Do you have a preference as to the various economic recovery measures that could be introduced by the government? You say that if additional impetus proved to be necessary, you would have other ways of influencing interest rates.

Would you prefer that the economic recovery be brought about by those various factors? Can you make any recommendations to the government on various budget recovery measures, bearing in mind that it is no doubt more productive to create economic activity among the population than to have to act on monetary policy, which I think is a last resort for a government that has not managed to stimulate the economy adequately?

[Mark Carney]

First, I have to be careful with that question because it is not within our mandate to offer the government official advice on the budget.

Second, the budgetary measures that Canada and the United States have taken are one of the factors in the Canadian recovery. Those measures will have increasing impact on our economy by the end of the year, especially in 2010 and especially in the United States.

As a result of the deep recession in Canada and internationally, it is important to consider measures that could enhance the productivity of our economy, as we've just discussed with Mr. Wallace. I'm talking about measures such as those contained in the last federal budget and a number of federal budgets that will be able to improve our economy's infrastructure and have a major impact on the global economy and productivity, as well as on commodities prices.

[The Chair, Conservative, James Rajotte]

Okay.

[Paul Jenkins]

I'd like to make a brief comment. Our forecasts are based on the fiscal policies that governments have clearly announced.

[The Chair, Conservative, James Rajotte]

Merci.

We'll go to Mr. Kramp for a final question.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Mr. Chair.

Obviously, the one thing that's always constant is change. In this world today, I don't think any of us have ever seen the changes taking place, either in markets, or economic policy, or the actual disastrous happenings on a global scale—at least certainly not in my time. But how do we react, and in what timeframe do we react?

Of course, many people call for major budgetary initiatives weekly and monthly. Quite honestly, I think we all recognize that's not feasible and doable. However, governments do have to react, and they can't always wait until after the fact. We can't now do a once-a-year budget when we're into situations that are so dramatically changing.

Should your information and monetary policy reports be done weekly, monthly, or quarterly? Consequently, for major budget initiatives and/or larger fiscal policy statements, what framework would you suggest for the government?

[Mark Carney]

Wow.

[An hon. member]

Oh, oh!

[Mark Carney]

Are you sure that clock's right? The—

[The Chair, Conservative, James Rajotte]

The question is how often do you want to see us, I guess?

[Some hon. members]

Oh, oh!

[Mark Carney]

I think on the Monetary Policy Report, or our projections, my personal feeling is that we probably have it about right. I take your perspective if you want to see this more frequently, but there's a lot of work that goes into this. Having the projection updated four times a year, you get a better-quality projection, if you will.

In doing this, it's our responsibility, though, in the intervening period to be pretty clear about whether we're starting to get off course on that projection. It's obviously our responsibility to be pretty clear about the assumptions underlying that projection.

With respect to government measures, I'll leave it to this committee to advise the government. We will take the actions of the government and adjust monetary policy accordingly. These are times of great uncertainty, and the assurance we'll give you is that we will do whatever is necessary—but no more—to achieve the inflation target.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Kramp.

Mr. Carney and Mr. Jenkins, thank you very much for being with us here today. We sincerely appreciate your time and your responses to all of our questions.

Thank you, colleagues.

This meeting is adjourned.