Finance Committee on March 10th, 2011

[Darren Hannah]

Okay, suppose I'm a Canadian corporation, not a bank, a multinational corporation, manufacturer, mining company, forestry company, what have you. I want to expand abroad. I'm operating in multiple countries. I'm looking for low-cost capital to try to access new markets. It's often emerging markets. They can be high-risk. They're looking for affordable capital that they can use to become global champions. They will try to find the least-cost source. That least-cost source may be in a financial centre in another country, in part because of an attractive tax jurisdiction. They will go there looking for financing. If you're a financial institution and you want to help them grow and you want to help them become Canadian champions, you have to be there. That is the role these financial centres end up playing. They become an avenue through which Canadian corporations, manufacturers, resource companies can access the capital they need to expand the product.

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

Approximately how many Canadians have an offshore bank account, and what is the average net worth of these individuals?

[Nancy Fung]

We do not have that information. However, when we talk about offshore accounts, probably the majority of these accounts are in the U.S.

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

My next question is for the Canadian Bankers Association.

Dr. Hejazi was here at committee on March 3. He testified that

...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.

He went on to state that Canada has about $500 billion in the global economy and that about 20% goes through offshore centres.

My question is whether you agree with Dr. Hejazi that the legal use of offshore financial centres is important to a healthy economy and that preventing access to these centres--in effect shutting off access to global markets--would hurt the Canadian economy.

[Nancy Fung]

Yes.

[Darren Hannah]

Absolutely. We believe that we should do everything we can to help create global champions in Canada. If that's one way of helping them expand, then that's a good thing.

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

How effective are the tax information exchange agreements in increasing tax transparency and in decreasing bank secrecy in tax havens and offshore financial centres?

[Darren Hannah]

It's interesting. Obviously, the fact is that this is a difficult measure, and it's subjective. But from our perspective, the more conduits for information you have, the more transparent the system becomes, and that's indeed why the OECD has talked about the progress it's made in the last couple of years in terms of transparency. Because there are so many more agreements, there are that many more channels through which information can flow, and that's a good thing.

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

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mrs. Block.

I have a couple of quick questions. I guess the first couple of questions would be for the Canadian Bankers Association.

My understanding is that you have a record of how many Canadians hold offshore bank accounts.

[Nancy Fung]

No, we do not.

[The Vice-Chair, Liberal, Massimo Pacetti]

You do not. Would you be able to get us that information?

[Nancy Fung]

I don't believe so, no.

[The Vice-Chair, Liberal, Massimo Pacetti]

Okay. Did you assume or do you know that most of them would be in the U.S.? That is not according to any statistics.

[Nancy Fung]

That's what our member banks told us. I guess a lot of people don't think of offshore as the U.S., but the number of snowbirds and individuals who travel to the U.S. I think validates that a majority of them would be in the U.S.

[The Vice-Chair, Liberal, Massimo Pacetti]

In your brief you state that in the 2010 federal budget, the government made tax evasion a predicate offence under the Criminal Code, and you have to report those suspicions to FINTRAC. Would you know how many reports were made to FINTRAC and whether that was effective?

[Nancy Fung]

We do not.

[The Vice-Chair, Liberal, Massimo Pacetti]

Would it be confidential? Would it be something we could get?

[Darren Hannah]

If you look in the FINTRAC annual report, they have data on the proportion of transactions they've gotten that were related to suspicious transactions, as opposed to large value. That's available, I believe, in the FINTRAC annual report.

[The Vice-Chair, Liberal, Massimo Pacetti]

We'll have a look at that. Thank you.

When we had the HSBC people in the media regarding UBS bank, with the U.S. trying to get information.... The U.S. government and the Canadian government haven't been successful, from my understanding.

How do you balance protecting banking rights or your clients' rights with upholding the law? How do your member institutions balance all that? At what point do you say that you want to be good corporate citizens and provide the governments that are asking for information with whatever they need and cooperate with them and then balance that with the fact that clients have a right to privacy?

[Nancy Fung]

I think, first and foremost, above anything else, we need to comply with the laws of the jurisdiction, whether they be privacy or regulatory laws. That is why we encourage the information exchange and feel that it is a method that would allow a government-to-government exchange of information. That is why transparency is so important.

[The Vice-Chair, Liberal, Massimo Pacetti]

Consistency of the government-to-government exchange of information would help your cause.

[Nancy Fung]

Yes, if there was an agreement.

[The Vice-Chair, Liberal, Massimo Pacetti]

Mr. Larin, I have asked the following questions several times now: is there a legitimate reason for using banks that operate in tax havens?

[Prof. Gilles Larin]

It depends on what you mean by “legitimate”, but one of the characteristics is certainly--