Good afternoon.
My name is Nancy Fung, and I am the vice-president of banking operations with the Canadian Bankers Association. I am accompanied today by my colleague, Darren Hannah, director of banking operations. We would like to thank the chair and the committee for the opportunity to be here today.
The Canadian Bankers Association works on behalf of 51 domestic chartered banks, foreign bank subsidiaries, and branches of foreign banks operating in Canada. Despite the turbulent economic environment of the last few years, Canada's banks have remained strong and continue to contribute substantially to the economic health of this country. Banks employ more than 260,000 Canadians, and full-time bank employment has increased 27% in the last 10 years.
The banking industry's contribution to Canada's GDP continues to grow, from 2.9% of GDP in 2004 to 3.8% in 2009, which is equal to $55 billion. Between 2004 and 2008, Statistics Canada data show that banks and other deposit-taking and investment companies paid $36 billion in corporate income taxes, representing 14% of all corporate income taxes paid in Canada in those years. In 2009, the six largest banks alone paid $7.5 billion in taxes to all levels of government in Canada.
Banks pay all taxes due on their business income in Canada and in other countries where they do business. Like many other Canadian businesses, banks are growing their business operations both in Canada and in other countries. By competing globally and earning foreign income, they generate economic benefits in Canada, such as more highly skilled, high-paying head office jobs and higher profits from which dividends are paid to Canadian shareholders.
All Canadians benefit from the success of Canada's banks. Most Canadians are shareholders in Canada's banks through the Canada and Quebec Pension Plans, their employer pension plans, RRSPs, mutual funds, and direct investments. In 2009, banks returned more than $11 billion in profits as dividends to their shareholders, who include the more than 17 million Canadians who own bank stocks through their membership in the CPP. Bank stocks are a key component of equity investments held by most private and public pension plans and mutual funds.
We are pleased that the House finance committee has taken the opportunity to review the important topic of tax evasion. And I want to be abundantly clear about this topic on both fronts.
First, Canadian banks do not promote tax evasion by their clients in Canada or in any other country. In fact, banks have policies and procedures in place to ensure the products and services they offer are not used for the purpose of evading taxes. Banks fully comply with the letter and the spirit of all laws, regulations, and reporting requirements designed to detect and prevent tax evasion.
Second, just as Canadian banks do not promote tax evasion among their clients, Canadian banks themselves do not evade taxes. They firmly adhere to the laws in Canada and in other jurisdictions where they carry on business, including laws that are designed to deter illegal activities such as tax evasion.
Banks are subject to regular oversight by Canadian tax authorities and the banks' prudential regulator, OSFI. Their corporate governance structure includes management and board committees, which oversee risk management, including compliance with tax legislation. I can assure you that banks take these two responsibilities very seriously. Tax evasion is bad business, and reputable financial institutions want no part of it.
I would like to take a few minutes to comment on measures that have been taken to prevent tax evasion.
The OECD has taken a leading role in developing international standards to enhance tax transparency. In 2000, the OECD established the Global Forum on Transparency and Exchange of Information for Tax Purposes. The objective of the global forum is to ensure that all jurisdictions fully implement the international standards on transparency and exchange of information.
The core product of the global forum is a standard for tax information exchange that provides for information exchange on request, including bank and fiduciary information. Put simply, what that means is that any information exchange agreement meeting the global forum standard includes a provision that empowers each government that is party to an agreement to ask another government to obtain and provide information about specific taxpayers, including banking information, if it has reason to believe the taxpayer is evading tax.
This approach to combatting tax evasion is working.
The work of the global forum has accelerated since the G-20 placed emphasis on tax information exchange as the key component to addressing tax evasion. The OECD indicated recently that since 2009, more progress towards full and effective exchange of information has been made than in the past decade. Between April 2009 and February 2011, the number of countries identified as not having implemented the standard shrunk from 44 to 9. Equally important is that all nine of these countries have committed to implementing the standard.
Canada has taken the leading role in this initiative. Canada has built on its already substantial network of tax treaties by concluding tax information exchange agreements with 14 jurisdictions, including several low-tax jurisdictions such as the Cayman Islands, Bermuda, and the Bahamas, and it's negotiating agreements with 11 others. In all cases, the agreements provide for the mutual exchange of tax information that is possessed by or accessible to the taxation authorities of either jurisdiction, in order to better administer and enforce taxation laws and to prevent international fiscal evasion.
In short, the Canadian government has made it a priority to ensure that it has the ability to investigate instances where tax evasion may be taking place. We encourage the government to pursue more such agreements. The government has also taken action domestically to better utilize the tools that are already available to help identify and take action on transactions that may be linked to tax evasion. In the 2010 federal budget, the government made tax evasion a predicate offence under the Criminal Code. If financial institutions suspect a transaction relates to laundering money received as a result of tax evasion, it must report those suspicions to FINTRAC. Again, we support this measure.
Although Canada already has a strong and robust system for dealing with tax evasion, certainly it can always be made better. For example, there may be ways to build on Canada's extensive network of information exchange agreements with other countries by expanding the network to include more jurisdictions. Alternatively, the government could consider incorporating the automated information non-resident reporting features that exist in the Canada-U.S. tax treaty into tax treaties and information exchange agreements with other countries. The committee may wish to explore these and other options as you weigh the evidence you have received and make your recommendations.
Thank you for your attention. We would be pleased to answer any questions members of the committee may have.