Finance Committee on Feb. 8th, 2011

[Scott D. Michel]

Well, that's a good question. In fact, a number of practitioners have been talking to the IRS about the possibility of adopting a second settlement initiative.

I actually received an e-mail from a colleague today that there was some rumour that it might even be announced by the IRS commissioner today that there may be a second program. He has already announced that there will be a second program; it's an open question whether it will have a sunset provision or whether it will just be an initiative that will remain in place.

But I think, speaking to the point of your question, that the IRS recognized that the settlement initiative in 2009 was so effective that it ought to do it again. And that's the right decision.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Block.

We'll go to Monsieur Mulcair, s'il vous plaît.

[Thomas Mulcair, NDP, Outremont, QC]

My question is for Mr. Sohmer, whom I also want to thank for his presentation.

When you equated $2 billion in UBS assets in Canada to a grain of sand, it made me think of a bible parable in which someone was trying to count all the grains of sand on a beach. I think that, to the average person, $2 billion is a significant sum. Earlier, I believe that Mr. Michel gave an explanation of the strategy used by UBS in the United States.

Was a similar strategy used in Canada?

[David Sohmer]

Well, the problem with Canada's going after UBS is the problem of a population of 33 million versus a population of 330 million. UBS operations in Canada are not significant. Between UBS AG—the branch—and UBS, the actual bank carrying on business here, I think total assets are probably in the $2 billion range. UBS U.S. has 28,000 employees; UBS Switzerland has 27,000 employees; UBS in all of the Americas other than the United States but including Canada has about 1,000 employees.

[Thomas Mulcair, NDP, Outremont, QC]

Was the strategy used by the Bank of Canada similar to the one used in the United States?

In the United States, high-level individuals were recruited to try to attract people and explain to them the possibilities of investing their money elsewhere. That was the UBS strategy. Once the list was provided to the American authorities, charges were brought against those on it.

Was the same model used in Canada?

[David Sohmer]

Again, Canada does not have the leverage, the economic muscle, to force UBS to provide a list of clients. In fact, the arrangement that the United States had with Switzerland was within the context of the existing United States-Switzerland tax treaty, which provided for an exchange of information relating to matters characterized as tax fraud rather than tax evasion.

It was one that had to be settled, because UBS could not be allowed to fail. It was one that Canada simply could not work. There's no way that Canada has of compelling the information, and to the best of my knowledge the CRA has stopped its attempts to try to get that information.

[Thomas Mulcair, NDP, Outremont, QC]

From UBS?

[David Sohmer]

From UBS.

[Thomas Mulcair, NDP, Outremont, QC]

I'll go in English with you now.

Could you summarize for us your concern with regard to the lack of harmonization between the Quebec rules and the federal rules? In the context of your presentation at the beginning, you were making it clear that you were concerned that this lack of harmonization was hampering attempts to bring people back into compliance.

Have you spoken with the Quebec minister? Have you tried to make your case there?

[David Sohmer]

Well, we have sent in.... Part of the material I have is an extensive brief that we sent to the Quebec authorities. I'll give you one small example.

We have clients who in 1946, after having survived the Holocaust in Hungary, moved to Mexico and in 1993, at age 73, moved to Canada. The immigration papers show “retired”.

We have no idea what he had in 1993, but we do know that in 2000 there was essentially $5 million with UBS. He died. The widow is now relying on the money. She is not necessarily compos mentis. We would like to clean it up.

We've made a deal with the federal government whereby the tax on the income only for the 10 years would be imposed, with some interest. Quebec is insisting on taxing the opening capital. When we say that from 1993 to 1999 it is absolutely impossible for a 73-year-old to have earned that money, their answer is, we don't care; we're going to tax it.

The fact is that she's relying on that money. We have no alternative but to go to court, and we will take Quebec to court. What's going to happen is that not only will we have the litigation, but people are simply going to move to Toronto, move to the United States—they'll leave it. Because of the bureaucratic position, I think the program faces a significant threat of closing down in Montreal, federally and provincially.

I might add that under the CRA—

[Thomas Mulcair, NDP, Outremont, QC]

As a suggestion, don't leave it at the administrative and bureaucratic level. You need to bump it up a little.

[David Sohmer]

I wish you could tell me how. In Quebec politics, the Liberals are not terribly popular, and the PQ....

[Thomas Mulcair, NDP, Outremont, QC]

I agree. That's why some of us went to the NDP.

[The Chair, Conservative, James Rajotte]

We have a former Quebec minister there who might be willing to help.

[Thomas Mulcair, NDP, Outremont, QC]

We have two former Quebec ministers.

[The Chair, Conservative, James Rajotte]

We have two former Quebec ministers; that's right.

Thank you very much for being with us here this morning, gentlemen. We appreciate your responses to our questions. If you have anything further for the committee, please submit it to us. We will ensure that all our members get it.

Colleagues, we will suspend for about a minute and then we'll go to committee business.

[The Chair, Conservative, James Rajotte]

I will ask colleagues to please take their seats. Thank you.

For committee business we have one motion from Mr. Mulcair. That is all I have with respect to committee business.

Also, for those who are on the subcommittee, we will be meeting in this room at 9 a.m. on Thursday.

I will ask Mr. Mulcair to move his motion, please.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair. I move the following motion:

That the Honourable Michael Holcombe Wilson be summoned to appear before the committee on Thursday, February 17, 2011, at 8:45 a.m.

The motion simply aims to follow up on several discussions that have taken place. Before the holidays, we heard from a prominent lawyer from a major law firm specializing in tax law. The firm is very well-known and represents many people with political backgrounds. The lawyer in question wanted to know why we wanted Mr. Wilson to appear. The answer is very simple: we want Mr. Wilson to testify for the same reason we wanted Don Johnston, former Liberal finance minister, to testify. Mr. Johnston did appear before us.

As you can see, the UBS issue is the one we have talked about the most this morning. Mr. Wilson played a key role for UBS in Canada for several years. Mr. Wilson is too modest. He said that he has nothing to say that could help the committee. However, I believe that, on the contrary, Mr. Wilson, with his experience and expertise, could contribute greatly to our study. Nevertheless, he maintains that he does not want to meet with us. So we have to insist on his appearance. All the motion says is that we should summon him to appear. That is the only way to go about this. In light of this morning's testimony, those who vote against this motion would be saying that they may have something to hide from us.

[The Chair, Conservative, James Rajotte]

Merci, monsieur Mulcair.

I have Mr. Wallace and then Monsieur Carrier.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I will not be supporting this motion to summon. We have received a letter from Mr. Wilson indicating that he understands what the study is about and he has nothing to offer the committee. We've also received that letter.

To compare Mr. Wilson with Mr. Owens is not accurate. Mr. Owens was here in his capacity when he worked, not as the minister in the Trudeau—

[Some voices]

You mean Mr. Johnston.

[Mike Wallace, Conservative, Burlington, ON]

I mean Mr. Johnston; I'm sorry.

He was here because of his work with the OECD and the work he did on tax evasion and so on. That was his purpose for being here. Those were the questions we were asking.

If we want to go back and start asking for finance ministers to come, we could go back 30 years and ask Mike Wilson to come. But also, in my view, why aren't we asking the former Liberal finance minister, the Right Honourable Paul Martin, to come back to talk to us about what happened for the 13 years or so—maybe it was 12 years, since he was Prime Minister for a year or so—and ask him what they did while he was there?

I think we appropriately asked Mr. Wilson to attend; he, I think, did the very courteous thing in writing us back saying that he has nothing to offer this committee.

We've had some great testimony today; we've had great testimony before. I think this is a waste of the committee's time. I will not be supporting this motion, and if it passes, I think I'll be putting in an additional motion about other guests to come to see us.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

Monsieur Carrier, s'il vous plaît....

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

We will support the motion Mr. Mulcair moved. I feel that it is important to have the opinion of politicians who have played a key role in this country's government. Now that they are no longer government employees, I believe that they may have more freedom and that they can testify about their experience. The tax evasion issue did not start with the Conservatives, it was there during previous governments as well. I think it would be useful to shed some light on this issue, to add to the testimony of experts. We have seen that banks have not been very forthcoming and that we are not getting much information from them. Therefore, we will support this motion in order to hear his testimony.