Finance Committee on Feb. 3rd, 2011

[The Chair, Conservative, James Rajotte]

Thank you Ms. Block.

We'll go to Ms. Hughes again, please.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Thank you.

I certainly appreciate the comments from my colleagues across the way. Ms. McLeod indicated that it's important to find a balance, and I think this is exactly the point I was actually making a while ago. It was about finding a balance on whether you should be removing investigators that are actually making a difference.

Let's just look. In 2008-2009 there was $7.4 billion that was actually recovered. I think this is an excellent return for the investment we have in having investigators there. So it's evident that investigations so far indicate that.

As you've mentioned as well, the loss of taxes to Canada is extremely substantial. That's what you've indicated, that you can only estimate that it's actually extremely substantial. Based on the amount of money that these investigators did find in 2008-2009, it's very evident. At the end of the day, it's really the honest taxpayers who are being shortchanged.

This loss of revenue impacts on the government's ability to provide public services such as health care, education, and job creation. For every dollar not collected, it actually means a dollar that someone else has to pay or a dollar that has to come out of the programming of the public services.

In the United States, they actually publish where the revenues are lost each year. They've indicated at one point that there was $100 billion in revenues lost, and this is to tax havens. So do you think this is a good practice, an effective way to ensure that government is actually transparent?

[Donald Johnston]

I'm sorry, which part of that...? Do you mean the publication?

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

Yes.

[Donald Johnston]

Well, they just published a gross number that they thought was lost in tax havens. I don't know how that contributes to government transparency. Transparency may sound like a well-worn phrase, but I happen to believe that it's the most important single thing in government--in fact in everything, and certainly in tax matters.

The more information that's out there for the public, the better. You made a point that I think is a very important one. Those people who are basically shortchanging the revenue authorities here--illegally, in other words, fraudulent dollars--are basically taking money out of your pocket. It's either coming out of the programs you said.... The programs that you want to finance are either short-changed or the taxes are too high to finance the programs because they'd be supplemented by this income. In the past, and that's what I said earlier, everyone thought it was so marginal that it didn't really matter very much, but maybe it matters a lot when you start looking at these numbers. These are substantial numbers we're talking about.

To me, it's reprehensible that I should be paying their taxes, basically, or that you should be paying their taxes. We're all paying their taxes.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

I think the impact is even greater when it comes to the dollars that are actually being taken out of the services that are being provided. We know that this actually affects the most marginalized people in society. Our point of view is certainly that we need to ensure that there is a better process put in place, that there's transparency, and that we look at enforcement and tougher regulations.

I just want to go back to a couple of comments you've made with respect to.... You've talked about a review process, you've talked about a financial task force. I'm just wondering if you can elaborate basically on the review process, the terms of that in the timelines, and then on the financial task force. If you could elaborate as well on their mandate and basically the entity of it, I just want a little more information on that.

Thanks.

[Donald Johnston]

Well, on the latter part, I can't really comment on the audit process, except that it exists. I mean, the OECD has probably published the reviews that are going to take place. They have, I think, a 30-man committee, which is broken down into various groups that are responsible for conducting these reviews of the TIs, or the taxation information exchange agreements. Are they being adopted? Are they being enforced? There will be a report made to the G-20 on that.

So that's the first part of the question. On the financial task force, I mentioned in passing the financial action task force--if that's what you were referring to--which was created also, I think, at the Lyon summit. It was tabled at the OECD. It was like CSIS, kind of a black box, because it was essentially working with the police authorities and others on money laundering. The whole idea was to try to get banks and others...because they also do audits. They go in and say, “Do you know your customers? Where did that money come from?” They try to work their way back up the chain to find out whether it was illegal money that was being transferred into some of our financial institutions, or whether fences were being used to get it out in public. We never really had any detailed information from them, because they regarded their work as very secret.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Hughes.

We'll go to Mr. Brison again, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you again, Mr. Johnston.

Our trade agreements today include strong provisions on labour rights and environmental responsibility. Should we be fortifying areas around transparency, either in the main bodies or through side agreements, and are there examples of trade agreements that have included these measures that you can point to?

[Donald Johnston]

I really can't respond to that in terms of transparency. I'm not sure how you would work that into the trade agreements.

[Scott Brison, Liberal, Kings—Hants, NS]

Well, if you could work...and currently countries do include chapters on labour rights and chapters on environmental responsibility that are actually quite robust in terms of punitive measures if either of the two countries fail to meet the agreed-upon standards. If countries can include in their trade agreements measures on the environment or on labour rights, I would posit that they ought to be able to do the same with measures on transparency, particularly transparency around tax measures, as an example.

[Donald Johnston]

I would imagine, though, Mr. Brison--I don't know, because I don't purport to have expertise in this area, but I would imagine that nearly all the countries with whom you negotiate trade agreements you also have taxation conventions with.

So that is the complementarity. I mentioned earlier the issue of, for example, transfer pricing and exchange of information. That exchange of information, in article 26 of your conventions, should cover that point--I think; it would be best to have someone in here from trade or from revenue to talk to that.

That said, I would have thought that they would regard those two as being complementary packages.

[Scott Brison, Liberal, Kings—Hants, NS]

I believe when you were at the OECD, the OECD led the charge with the MAI, the multilateral agreement on investments. Could a vehicle like the multilateral agreement on investments help achieve greater transparency and help provide additional tools to fight, for instance, inappropriate tax measures or actions or evasion?

It strikes me that the New Democrats, I believe, and perhaps some of their sister parties in other countries, played a role in opposing the MAI, but would the MAI have potentially helped strengthen governments' multilateral capacities to act on this issue?

[Donald Johnston]

I think so.

The work done leading up to the failure of the MAI became a very substantial and important piece of work in terms of the investment provisions that have been introduced elsewhere and have been working through the WTO and so on. All of these are very important instruments. You have investment provisions in the FTAs, NAFTA, and so on.

I don't know the individual agreements sufficiently well, plus it's not something I spend a lot of time looking at. But as you know, there's been a huge proliferation of what they call RTAs, regional trade agreements, which are bilateral trade agreements. That's because, as I mentioned earlier, of the slowdown of the Doha round. I think all of those will have investment provisions.

[Scott Brison, Liberal, Kings—Hants, NS]

And all of those agreements have more robust provisions on areas outside of the traditional realm of trade than was the case in the past. The recent free trade agreement between Canada and Colombia had the most robust provisions on both labour and environment of any trade agreements Canada has ever signed, and any trade agreements signed between two countries. There's an evolution toward including more in the trade agreements.

It strikes me that's one of the areas the committee could look at; that is, whether tax protocols and transparency could be important ways to ensure that economic engagements can actually facilitate greater governance.

[The Chair, Conservative, James Rajotte]

Very good. Thank you for that.

Mr. Paillé, you have one minute to ask your question.

[Daniel Paillé, Bloc, Hochelaga, QC]

I quite like Ms. Block, but I am leery when she expresses appreciation.

You said you were leery of the total amount. Tax evasion activities were said to represent x billion dollars. I agree with you, because if we knew the exact amount, we could go after it.

You brought up political will. You mentioned organizations such as the G20. Does it not depend on the leadership of the current G20 chair?

For instance, Mr. Sarkozy showed a great deal of leadership when it came to cracking down on tax evasion, while others spent more time planning lakeside parties.

[Donald Johnston]

Absolutely. President Sarkozy will likely push through many reforms in all these areas, as I was reading today. I think he and Angela Merkel will, to some extent, solve these issues, which have both tax and monetary implications, within the European Union.

I am impressed by Mr. Sarkozy's enthusiasm and creativity.

[Daniel Paillé, Bloc, Hochelaga, QC]

But when Canada is in command, we plan parties.

[Donald Johnston]

Canada's commander-in-chief? Are you referring to the Governor General?

[Daniel Paillé, Bloc, Hochelaga, QC]

No, I am not referring to your namesake, the Governor General.

Thank you very much, Mr. Johnston.

[The Chair, Conservative, James Rajotte]

Mr. Johnston, thank you very much for being with us here this morning. We appreciate your comments and your responses to our questions, and for the very informed discussion.

Colleagues, we will suspend for a minute or two and then we will return with committee business.

[The Chair, Conservative, James Rajotte]

Colleagues, we are continuing our discussions with respect to committee business. We have a motion from Mr. Brison.

Just before I go to that, I think I have consent from all four parties.... The Parliamentary Budget Officer, Mr. Page, cannot appear on February 10, so I think I have agreement that he will appear on February 15. He will appear for one and a half hours, and then we will have the economists for one and a half hours. So we will have a three-hour meeting on Tuesday, February 15.

On February 10 I would like to have a subcommittee meeting instead at that time. It will probably take only one hour.

Is that agreed? I take that as consent. Thank you all.

We now have a motion by Mr. Brison. We all have your motion.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Chair.

I will just speak briefly to the motion.

We all recognize that we have a constitutional responsibility as members of Parliament to scrutinize the estimates. The cost estimates for the justice legislation obviously must have been prepared before the legislation went to cabinet. Cabinet has made a public decision to support that legislation, but we are denied as legislators the opportunity to determine our support with that information.

The cost estimates are not covered by cabinet confidence because at the end of the day probably the greatest responsibility of Parliament is to scrutinize and oversee the public purse and ensure that tax dollars are spent wisely. Cost estimates are used by each department in ways that are not directly related to cabinet, and as such are not covered under cabinet confidence.

As another example, the projections of corporate profits before taxes and effective corporate income tax rates are used by the department in ways that are not directly related to cabinet and are not covered by cabinet confidence. I have a precedent on this, and not only one precedent. There are innumerable precedents on this.

If you go to November of 2005, the economic and fiscal update, the last one during the good old days, on page 83 of the economic--

[Mike Wallace, Conservative, Burlington, ON]

When you were a Conservative? I can't remember. Were you a Conservative in the “good old days”? I can't remember.