Finance Committee on March 3rd, 2011

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chairman.

I'd like to thank our guests for coming this morning. It has been a very interesting conversation.

I'm going to focus, I think, a number of my questions to Ms. Champoux-Paillé. I have to speak in English, I'm sorry.

I think the fundamental discussion thus far has been that there is a difference, my view included, between tax evasion and tax avoidance.

Every year at this time many of my colleagues and residents in my area are putting money into RRSPs. I would say they are trying to avoid paying more tax. It's not necessarily thinking about the long-term benefits of saving for their retirement but really sort of an immediate reaction, that “Hey, I have to put some money in an RRSP, I have lots of room, and it will help me save a few tax dollars.” So that's tax planning, tax avoidance. I don't really think there's anything wrong with that.

Personally, I would prefer a flatter tax system with a lot fewer deductions in it. But that isn't going anywhere. The system is the way it is, and it is tax planning.

I had an event this past week with 260 seniors at it, a tax planning seminar put on by CRA and Service Canada, where they were the speakers and we had 260 people. There were some questions from the audience that were on tax planning issues, and they could not answer because they have to have a financial adviser giving out that information.

This leads me to my question about your organization. I'm a little confused based on your.... You say “its mission, as the name indicates, is educating and advocating for investors”. In terms of the organization, does that not include—in informing and educating investors—tax planning and tax avoidance issues, not just tax evasion? Does your organization make a significant...?

[Louise Champoux-Paillé]

We train people to behave appropriately as citizens. In that sense, we promote a fair and equitable contribution to taxation. Members of society have a right to provide for their retirement, but avoiding paying tax and investing offshore in order to pay less tax is unacceptable. We train people accordingly.

[Mike Wallace, Conservative, Burlington, ON]

Here's my next question. In your presentation today, which I appreciate seeing in both official languages, you cite three papers: “Opportunity to close bank subsidies in tax havens”, 2002; “Shutdown of tax havens”, 2005; and “Elimination of bank subsidiaries at branches in tax havens”, 2011. Are those papers that your organization has presented?

[Louise Champoux-Paillé]

Yes, to the banking institutions.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

I think elimination of bank operations in other countries is a fairly difficult thing to make happen. I know you make an argument that you think your work has generated some activity by the National Bank, in terms of removing some of its branches. Is it not just as important that we have banks have a disclosure requirement such that whatever money from Canadians goes into their branches in other jurisdictions, we are informed of that money, so that we know it's there?

Isn't that really what you're after? It's the information; it's not whether the branches are in those countries or not. Or do you make a distinction there?

[Louise Champoux-Paillé]

We are not saying that banks should not have subsidiaries offshore. We are simply asking that they not establish them in tax havens. And we have had success in that regard. Last year, we presented a similar proposal to CIBC shareholders and it received support from 9.5% of them. That is not very much, but 9.5% represents the small shareholders. It's important to consider the fact that 30% of banking shares are held by small individual investors, that 50% of them do not vote and that only 15% do. Ultimately, 9% out of 15% means that 50% of individual investors voted in favour of the proposal that tax havens be abolished.

[Mike Wallace, Conservative, Burlington, ON]

Okay. Merci beaucoup, madame.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

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

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you, Mr. Chair.

I'd like to ask all three of you a question. As I'm the last questioner, I'd like....

Am I the last questioner?

Oh, I'm not; we have a motion, yes.

[The Chair, Conservative, James Rajotte]

We have a motion. It depends how long members want to debate the motion. But you have your five-minute round.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Okay. Thank you.

What I'd like each of you to do in turn—and you have about 90 seconds to do so, because if it's under 90 seconds and I have time left, I'll be forced to talk about corporate tax cuts, which I don't want to get into here....

Really, what we're talking about is tax fairness. If you have a suggestion or a thought concerning one or two or three items that you'd like to share with us on how we can improve tax fairness with respect to our discussion today, I think we'd all like to hear.

Perhaps Ms. Champoux-Paillé could begin. We want to give each of you an equal amount of time.

[Louise Champoux-Paillé]

In our brief, we made a number of proposals. I am not going to go over them again, but I would just like to mention that one of the main recommendations is that considerable thought must be given to the ethical side of our Canadian tax system. That is what we are looking at, and I would urge you to gather the opinions of individuals, of ordinary Canadians, with respect to our Canadian tax system.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Thank you.

Mr. Jarislowsky.

[Stephen Jarislowsky]

I don't believe there is such a thing, as long as we have politics.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

I don't know whether you would wish to expand on that. You have a few moments left.

[Stephen Jarislowsky]

I gave you a number of examples before: the City of Montreal amalgamation, school taxes.... It just goes on and on. As my friend the Premier of Quebec said, “I will not buy votes when I'm no longer in politics.” I think this is a terrible thing.

I also believe that to the extent that there are pressure groups that influence decisions, those also—and this is more obviously true in the States than here.... There, it is almost mandatory that people stand up for certain things, because otherwise they don't get re-election money from certain areas. As long as that is the case, you're not going to have real tax fairness, and I don't expect it.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Hejazi.

[Dr. Walid Hejazi]

I love your question. I think it's a terrific question, and I wish I had an hour, but I know I only have a minute.

To follow up on the last comment, “as long as politics...”, when you have people standing up and talking about tax evasion, tax havens, multinationals not paying their fair share, and then when you ask a broad cross-section of Canadians, it appeals to their...I'm not sure what the term is, but....

What we want to do as policy makers is create an informed decision. We don't want to make a decision only to get votes or only to appease a wide part of the public who may not understand fully the issues before us.

I believe we get tax fairness when we create an environment in which our companies are able to be globally competitive. There's a $10,000 prosperity gap between Canada and the United States: the average American earns $10,000 more than the average Canadian. If we could create an environment that is globally competitive and close that prosperity gap—raise the level of income in Canada to the level it is at in the United States—then with the same tax rates that we see today, the tax revenues we would generate would be so substantial that we could fund all of the initiative the government has before it.

So the right way to get the tax fairness is to think about the economics, create an environment that creates the biggest economic pie, and then take the tax revenue that's generated from it and use it for the initiatives that we have before us.

Thank you.

[John Rafferty, NDP, Thunder Bay—Rainy River, ON]

Mr. Hejazi, here is one quick question. I have 30 seconds.

Are OFCs, as you term them, working as they now are? Is the system now fair?

[Dr. Walid Hejazi]

Without question it is. The fact that Canadian companies are as competitive as they are in the global economy, with all of the measured benefits this situation has had on Canada by way of raising our GDP and raising our income per capita, has generated additional tax revenue. OFCs are working when they are used for legitimate purposes. Interfering with that would hurt Canada and would hurt tax fairness.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Jarislowsky, you may add very briefly, please.

[Stephen Jarislowsky]

I would say that to the extent that we had more capital because we controlled our government costs better and had lower taxation—we have double taxation on dividends today in Canada—and had as a result more investment capital, the richer, in the long term, Canada would become.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm sad to break off this discussion. It's been a very fascinating discussion, and members still have some questions.

Thank you very much for your presentations and for answering our questions.

We have a motion that we have to deal with today, so I'm going to thank our witnesses and excuse them, and then I'll go to the point of order from Ms. Glover—

[Shelly Glover, Conservative, Saint Boniface, MB]

The point of order involves the witnesses.

[The Chair, Conservative, James Rajotte]

Oh.