Good morning.
I am Alain Deneault, sociology researcher at the Université du Quebec at Montreal, and author of the book entitled Offshore: Paradis fiscaux et souveraineté criminelle, published in France by La Fabrique and in Quebec by Écosociété. This book will soon be published in the United States by The New Press and it will be entitled Offshore: Tax Havens and the Rule of Global Crime.
I thank the Standing Committee on Finance for allowing social sciences thinkers in the humanities to speak on tax-related issues. As you know, fiscal matters affect crucial public service funding issues and the state's very capacity to guarantee the reliability of its institutions. Thus, it is a good idea not to limit reflection on this matter to certain disciplines, nor to observe things exclusively from the perspectives of law and accounting.
Tax evasion and, more generally, tax leakage, cause social and political problems on a grand scale. In 2005, the Quebec Minister of Finance estimated that tax evasion-related potential losses to the public purse amounted to more than 5% of the gross domestic product. And to this must be added the unrecorded fiscal avoidance losses and losses due to aggressive tax practices. In the case of tax avoidance, we are referring to legal tactics such as transfer pricing, and in the case of aggressive practices, tax avoidance strategies that lie on the very edge between legality and illegality.
Also contributing to this hemorrhage are dumping phenomena that are difficult to quantify, such as tax reductions granted by northern regimes to wealthy stakeholders, under the pretext that we have to compete directly with tax havens, or the part of the debt service we must allocate to reimbursing loans from financial institutions that are not taxed enough, or not taxed at all.
Switzerland, for instance, is a country that is symbolic of complacent regimes that have historically facilitated various tax avoidance measures. Several authors have substantiated this. Switzerland has even in the popular imagination become a symbol of suspect manoeuvres or obscure money transfers. However, focusing on the Swiss Confederation or some of its banking institutions, as has been done in the past, can be encouraging if we indeed focus on dismantling that symbol. However, the issue of tax havens goes beyond the matter of Switzerland alone.
This does raise certain fears. José Gayoso, member of the Association for the Taxation of Financial Transactions for the Benefit of Citizens, in France, feared that the case of Switzerland was being used to simply condemn that country, to the benefit of competing tax havens. Mr. Gayoso received considerable support from no less a source than retired Geneva Justice Bernard Bertossa, who is usually very critical of his own jurisdiction, but states in his book La justice, les affaires, la corruption, that: “It is an undeniable fact that there is as much, if not more, dirty money in the City of London as is to be found in the banks of Zurich, Geneva or Lugano.”
Switzerland must not become the tree that prevents us from seeing the forest. The United States, China and the United Kingdom, among other countries of the G20, freely criticize Switzerland but spare their comments with regard to Delaware, Macao, London and a host of other countries that constitute, in the Caribbean or elsewhere, the most controversial tax havens on the planet. Canada does not seem to be an exception among the members of the G20. Within Canada itself, Halifax plays the role of offshore centre in close contact with Bermuda and the City of London, with insurance companies and venture capital firms, a sector that was in the forefront of the 2008 economic crisis, and benefits from major tax advantages. The Conseil de développement économique de la Nouvelle-Écosse [Nova Scotia economic development council], directed by a board of directors from the private sector, the Nova Scotia Business Inc., also gives tax exemptions to offshore companies that hire local accountants rather than accountants from their own jurisdiction.
On the international scene, Canada appears to be the ally of Caribbean tax havens that have yet in the past been targeted internationally by the OECD, the FATF or the IMF, for instance. Our country, Canada, sits within the bodies of the World Bank next to an array of Caribbean tax havens: Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts-Nevis, St. Lucia, as well as St. Vincent and the Grenadines. One of these countries is under surveillance by the Geopolitical Drug Observatory, and many international criminologists consider several of these countries as clearing houses for drugs coming from Columbia.
Often, Canadians, or parties related to Canada historically, were the ones who created the business sectors in these Caribbean tax havens, if not themselves draft financially advantageous measures for the banks that have their branches there. You will recall for instance that in the 1960s, Sir Stafford Sands was at one at the same time responsible for finances in the Bahamas and also a member of the Royal Bank of Canada board of directors.
Moreover, Canada continues to have a privileged relationship with Barbados. The binding double taxation avoidance agreement has proven to be a permanent tax amnesty for stakeholders who practise tax avoidance tactics such as transfer pricing.
Canada in fact is continuously adding to the fields of activity that benefit from this tax haven's jurisdictional clemency, as the field of insurance was added in 2010. And let's not even mention the free trade agreements Canada is signing with Panama and Columbia.
It is not unusual for offshore companies that offer tax avoidance services in Canada to resort to tax havens such as Luxembourg.
In conclusion, it is clear that the Canadian Parliament must highlight the losses that derive from the Swiss bank accounts of Canadian taxpayers in banks such as HSBC or UBS, which cases may involve tax evasion and money laundering.
It would be a mistake however to isolate these cases as though they were unique phenomena. In order to set out the problem in a serious manner, the whole issue of tax evasion must be considered in light of the international deployment of an array of complacent legislation. It must be dealt with against the backdrop of the complacency of northern states that often legalize what amounts to wrongdoing when seen in the context of the principles of equity and justice that must be at the heart of taxation generally.
Tax evasion must be studied at the same time as various tax avoidance measures, even though they may be considered legal.
Thank you.