We could follow...Geneva or something.
Evidence of meeting #56 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was oecd.
A recording is available from Parliament.
Evidence of meeting #56 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was oecd.
A recording is available from Parliament.
9:30 a.m.
Conservative
The Chair Conservative James Rajotte
Okay. We look forward to that.
Monsieur Carrier, vous avez cinq minutes, s'il vous plaît.
9:30 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Thank you.
Good morning, Mr. Johnston. I am not an expert in finance. I am a member of Parliament, and my focus is my constituents. I would like you to give me some insight into a few things. Alain Deneault, a researcher who appeared before the committee on Tuesday, told us that Canada was considered an ally of tax havens. That impression comes from outside the parliamentary realm.
9:30 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
It is seen as an ally of tax havens or a collaborator, if you will, with these countries in encouraging tax evasion. He also told the committee that the Quebec government alone was losing 5% of its income as a result of tax evasion.
We also heard from Brigitte Alepin, a chartered accountant specializing in taxation. She said that Canadians had invested an estimated $146 billion in tax havens in 2009.
I find that very discouraging. I want to know whether you share the view that Canada is an ally of tax havens, or whether you see that as a false impression of us. I would like to hear some of your thoughts on that.
9:30 a.m.
As an Individual
As a Canadian taxpayer, I am not under the impression that I live in a tax haven.
9:30 a.m.
As an Individual
You said we were an ally.
I have a number of thoughts on that. I would like to know how she came up with that figure of $146 billion invested in tax havens. And where does the estimate that Quebec lost 5% or 4% in income come from?
People who present those kinds of figures have to back them up. That is impossible. How could she know how many Canadian dollars are invested in Andorra, for instance?
I cannot comment on those figures. I do not feel that Canada encourages tax havens. Period.
9:30 a.m.
Bloc
Robert Carrier Bloc Alfred-Pellan, QC
Just as an example, given that we are short on time, as you well know, Canada's five largest chartered banks state in their reports how much money is invested in tax havens. And that total is $1.3 billion. That is the estimated amount of tax income that the country has lost. So that is a known figure. There are many others we do not know, as you said. We do not know the whole story, but the banks themselves estimate the figure to be $1.3 billion, according to their reports. That is how much companies have saved by using tax havens, by using the subsidiaries of Canadian banks. So that is a known direct incentive being used by financial institutions to encourage investment in tax havens.
On Tuesday, Ms. Alepin told us that international agreements are necessary in order to do anything about tax evasion and that it is difficult to take a unilateral approach.
I want to know whether our hands are tied. Why is it that Canada cannot take action to improve the situation and reduce investments in tax havens?
9:30 a.m.
As an Individual
I would imagine that the investments you are referring to—lost income, as you put it—likely come from sources outside the country, for the most part. The banks have subsidiaries in the islands of Jersey, Guernsey and so on. That money is derived from activities that are not Canadian, activities that take place outside Canada.
So, if Canada were to change the law to create a tax with what I mentioned, income that was not generated through a business activity would be taxable here in Canada. But when you have a bank operating in Africa and making profits in Africa, should those profits be subject to Canadian taxes? I think not, but that could change.
It is up to you to decide and to make recommendations.
9:35 a.m.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Thank you, Chair.
I appreciate your presentation today. It certainly brings much expertise to the table.
First of all, I want to pick up on two comments, and perhaps this is as much a comment as a question. We talked about the capacity of CRA. I think Ms. Hughes indicated that we had fewer people on the job. You talked about there certainly being money out there. There are diminishing returns as you increase, and there are opportunities with new technology. I think, for the record, that the CRA's aggressive tax-planning program has doubled. The number of full-time employees working on international audits is up 44%, and an additional $30 million has been allotted to combat international tax planning. Last year we actually retrieved $1 billion in unpaid taxes.
I really appreciated when you commented that we need to achieve that balance in terms of, yes, perhaps more resources. But where is that right balance? Hopefully we are working towards making sure that we achieve that. I don't know if you have any comments.
The other comment I really want to pick up on also is that Mr. Owens said that we know that the number is big, and we know that we just need to deal with it and go after it rather than focus on a lot of quantification. Our colleague from the Bloc suggested that it's quantified. Could you talk again about the challenges of quantifying? Do you perhaps share that perspective of Mr. Owens that it's out there, it's big, and we need to proceed?
9:35 a.m.
As an Individual
I can't really add much to what Mr. Owens said, because I don't have any personal knowledge of it.
I've actually followed the activities of this particular debate quite closely. I have felt that taxation is so fundamental in so many areas that I've engaged in it myself, historically. How can we tell how much money, such as these numbers we're hearing here, are out of those tax havens? We don't know.
The whole purpose of Jeffrey Owens' work is to create these taxation information and exchange agreements that the G-20, which Mr. Brisson has told us are significant.... I think the pressure from the G-20 is very significant in ensuring that these other jurisdictions that are so dependent upon the G-20....
I mean, Switzerland was very difficult, for example. Switzerland has moved a long way in the last few years. Now, why is that? Well, it's because Switzerland has a lot of interests other than just the banking sector and other than just bank secrecy, and so on. It's because of the pressure from European countries, the United States, Canada, and others that these countries will come around. That's what has to happen. The pressure must come from outside, and it is. It's happening. But as Mr. Owens probably told you, it's not complete yet. Everyone is off the blacklist, but that doesn't mean that everybody is conforming to the tax information exchange agreements. That's why there's an audit that goes on. There's a whole series of criteria that are applied to determine whether they are conforming.
I would say to give it a couple of years and see how much progress we make. If you collected a billion dollars last year, maybe you'll collect another billion this year. I mean, I don't know. But we're talking serious money. We do know that.
9:35 a.m.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
You have indicated that every country now is off the blacklist. It sounds as if there are a few countries that, perhaps through lack of monitoring or through lack of will, have not passed some of the phase one and phase two audits. But there is certainly pressure on them to up their standards.
9:40 a.m.
As an Individual
That's my understanding. Again, I'm four years out of the OECD, so I've basically just been following the traffic on this, as you and others have. I have seen the blacklist has now gone, but that doesn't mean there are no deficiencies. I think there are a lot of deficiencies in the report that was put forward two years ago. There were still a lot of.... They all were off the blacklist, but a lot of countries were still having difficulty conforming to some requirements. For example, in some jurisdictions it's very hard to tell who the beneficiaries are of certain bank accounts, trusts, and other arrangements of that kind, and that work must continue.
9:40 a.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
We will have time for another round, Ms. McLeod.
We'll go to Mr. Pacetti, please.
9:40 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chairman.
Thank you, Mr. Johnston, for coming forward.
We had Mr. Owens from the OECD, and I think Ms. McLeod was asking the question.... Correct me if I'm wrong, but when you were part of the OECD it was more of an exclusive club where you said you were not going to do business with those who didn't have the same regulations or rules as we do. What I'm understanding from Mr. Owens is it's more inclusive now: if you want to do business with us you have to conform to us. Am I understanding that correctly? Has the attitude changed?
9:40 a.m.
As an Individual
I don't know. I think this goes back to a question that Ms. Hughes raised about not doing business or trading with a country because it's not meeting your standards in taxation. The OECD used to be called the rich man's club when I joined it, which was a bit of an exaggeration, since Turkey had been a member from the outset in 1960, and of course we had other countries coming on.
The OECD's reach has extended enormously in the last 10 to 15 years. When I was there, there used to be 28 countries, then I received Poland and Korea and Slovakia, I guess; that meant three, 27 up to 30. Now more have been added. But apart from the ones that were added, this global forum that I expect Jeffrey Owens spoke about, which we created in 2000, something like 95 countries are involved in this global forum. So we're talking now about the bulk of the world's GDP that's represented at the forum.
Those countries are the ones that are taking on these understandings, these obligations, these agreements, and these tax information exchange agreements. The impression he might have left is it was a small club initially that was mostly trading among themselves. Among the OECD members they were about 60% or 70% of GDP, but then of course that all changed with China, India, and others coming on. Now, of course, it's a much broader base, and that means many more countries--
9:40 a.m.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
In your opinion, global uniformity is better than exclusivity?
9:40 a.m.
As an Individual
Global uniformity in terms of transparency, yes, not in terms of tax rates, but in terms of--
9:40 a.m.
Liberal