Evidence of meeting #61 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was companies.
A recording is available from Parliament.
9:45 a.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Thank you.
Mr. Jarislowsky, a technical question for you. You've been very candid in your answers, and I certainly appreciate that, and I know that we all have appreciated that. I'll be candid, too, quite frankly and say that I can barely manage my own finances—
9:45 a.m.
Voices
Oh, oh!
9:45 a.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
—but I do have a question for you. That is, suppose I woke up in the morning and under my bed I found a couple of million dollars in a suitcase.
9:45 a.m.
An hon. member
You'd be a Liberal.
9:45 a.m.
Voices
Oh, oh!
9:45 a.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
No, it's a serious question now. How would I go about not paying any taxes on that money? I just don't know how it's done. When I think of individuals and I think of tax havens, I just simply don't understand how people do it.
9:45 a.m.
Chairman and Director, Jarislowsky Fraser Limited
It would be a question of whether it was capital that you had forgotten due to a situation of Alzheimer's or something else, and not necessarily to be joking, or whether it in fact was revenue that you should declare. If it was revenue that you should declare, well, then you should declare it.
9:45 a.m.
NDP
9:45 a.m.
A voice
We'd call you Mulroney.
9:45 a.m.
NDP
9:45 a.m.
Chairman and Director, Jarislowsky Fraser Limited
You would obviously just keep the money and say nothing and hope you get away with it.
9:45 a.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Maybe anyone can jump in. How would I invest that in a tax haven?
Yes, Mr. Hejazi.
9:45 a.m.
Associate Professor, University of Toronto, As an Individual
I don't have the study with me, but I think what you're alluding to—I think, and correct me if I'm wrong—is if I were to walk into one of the big banks and deposit, the RCMP would probably be notified. But I think what you're maybe trying to get at is, would I put it in my briefcase and fly to a Caribbean island to try to open an account and hide it there? Maybe that's what you're going towards.
9:45 a.m.
Associate Professor, University of Toronto, As an Individual
There's a study that came out, which I can share with the committee. I don't have it with me. It was a professor in Australia who actually went to 10 OECD--developed--countries, including the United States and Canada, to several offshore jurisdictions, and as a non-citizen tried to open accounts. He found that the most difficult jurisdictions to open accounts in were in the Caribbean, in those tax havens, as you put it, those offshore financial centres. He found the easiest place to open an account was in the United States. So the idea that I could simply get on a plane and fly to an island in the Caribbean and open an account with this suitcase full of money...this is not something that I'm aware is easily done. It probably can be done, but it's not as easy as you might think, with people just getting on a plane and walking into a local bank and opening it. They will not open accounts for you just like that.
9:45 a.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Thank you for that comment.
I think I have about a minute left.
Mr. Jarislowsky.
9:45 a.m.
Chairman and Director, Jarislowsky Fraser Limited
In our firm, to the extent that we get money of this type, we have to report it. I think that is totally proper. Therefore, the way we are regulated in the investment management business, we cannot just take that money.
9:50 a.m.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Rafferty.
We'll go to Mr. Brison for a five-minute round.
March 3rd, 2011 / 9:50 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you very much. This has probably been one of our most productive panels. All three of you have been very direct and helpful in terms of us understanding this issue.
Mr. Jarislowsky, what is the impact of capital gains tax in Canada leading people to temptation, as it were, in terms of potentially moving money to other jurisdictions? I'm not inferring illegal activity; I'm saying legitimate and legal tax avoidance measures.
I'd appreciate your view on capital gains tax and what role it may play.
9:50 a.m.
Chairman and Director, Jarislowsky Fraser Limited
I think capital gains tax obviously plays a role in how people invest. On the other hand, to the extent that you deal with stocks or other assets that pay income, that income is declared every year on your return and is taxed to the extent that it's taxable. A problem that arises very often is if you had held a security for about 50 years and your records don't exist anymore, you will probably have to go to the V-day date in 1972 to fix your capital gains tax. Very often, unless you have an accountant who keeps track of each one of your assets in stocks and bonds and the original cost in Canadian dollars, sometimes the records are just not there.
By and large, in Canada, I believe most people in these types of assets pay a capital gains tax. To what extent they pay it when they sell a cottage where they haven't kept all the repair bills, etc., that's a different matter and it's much more complicated.
As an aside, I think you should also address at some point the RRSP, RRIF situation, where, in effect, if I invest in stocks, when I take the money out I don't pay any capital gains tax, but I pay 100% tax instead of the 50%. This makes it pretty prohibitive to invest in stocks in that kind of investment.
9:50 a.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
This is not on the offshore tax haven issue directly, but in your experience, what effect do capital gains taxes have on people's investment decisions? In other words, are people making investment decisions in many cases based on tax reasons as opposed to rational investment decisions?
9:50 a.m.
Chairman and Director, Jarislowsky Fraser Limited
As I tried to tell you before, if I get 4.5% in interest per year, I get absolutely no return after tax and after inflation. By and large, I believe most people are forced to go for investing on the basis of trying to obtain capital gains to get a real return on an investment.