Evidence of meeting #63 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was banks.
A recording is available from Parliament.
9:20 a.m.
Chairman, Research on Public Finance and Taxation, Professor, Université de Sherbrooke, As an Individual
Automatic exchange applies only to European Union member countries.
9:20 a.m.
Bloc
Daniel Paillé Bloc Hochelaga, QC
And Canada considers a TIEA to be a treaty, which really means that it isn't one, based on your analysis.
9:20 a.m.
Chairman, Research on Public Finance and Taxation, Professor, Université de Sherbrooke, As an Individual
Yes.
9:20 a.m.
Bloc
Daniel Paillé Bloc Hochelaga, QC
I want to come back to your recommendations, because my time is almost up now.
You make four types of recommendations. First of all, you say that TIEAs should include a regular review mechanism in order to avoid fast tracking. The second, third and fourth recommendations deal with key indicators. In your fifth recommendation, you say the Agency should do its job and undertake a review of tax treaties. As we say, some of them go back to 1960. Yet very few people in this room today were actually around in 1960. The sixth recommendation is that, if talks do not result in a protocol, the government should “take the necessary action to repudiate the convention”.
Has Canada ever repudiated a tax convention?
9:20 a.m.
Chairman, Research on Public Finance and Taxation, Professor, Université de Sherbrooke, As an Individual
No, not to my knowledge.
9:20 a.m.
Liberal
9:20 a.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
Thank you, Mr. Chairman.
I have a comment to begin with. First of all, welcome to all the witnesses. Bienvenue.
I have a comment about the recommendations that Monsieur Larin has made. I've noted, when I was reading them, that as a professor you've suggested study, study, review, review. Yet that, to me, is not going to be actionable to actually get to the source of the tax evasion and, frankly, hold them to account. We can do all the reviews and studies and whatnot we want, but in the end we have to go after those people who are responsible for these criminal activities. It's criminal. Tax evasion is criminal. I just wanted to make that comment. But I do appreciate your research, and I know you spent time at a conference recently in June 2010 with some other experts, and I would love to have more than seven minutes to talk about what those experts had to say as well.
I do have to look at what was said in committee already, and I'm going to focus more on some of what the other witnesses have said who are not interested in just studying the issue but are actually looking at some tangible steps forward. Dr. Hejazi was here and he talked about the fact that the Canadian government has a record for trying to do the right thing, which I appreciated hearing. But he had a quote, and I'd like to read that: Canadian tax revenue “would go down”. He's referring specifically to the fact that Canadians talk about using offshore jurisdictions legally, and if we removed the ability of Canadians to use offshore jurisdictions legally, Canadian tax revenue would go down. He also said, “I argue it would go down because the income generated would fall because Canadian companies would not be as productive and competitive. Secondly, many Canadian companies would actually leave Canada....”
I'm going to ask the banks if they agree. If legislation were changed to prevent Canadian companies and banking institutions from accessing offshore financial centres, would Canadian competitiveness suffer? And do you believe that some companies would actually leave? We do have examples of Canadian companies that come back because of our system, but if we eliminated the possibility of them actually using legally those offshore systems, what do you think would happen to those companies?
9:25 a.m.
Vice-President, Banking Operations, Canadian Bankers Association
I guess one option is that they would leave. I guess the second option would be that there would be less investment globally and we would be less competitive. So we are in full agreement with Professor Hejazi's comments.
9:25 a.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
What happens to the workers and consumers when companies leave? What happens when competitiveness is reduced?
9:25 a.m.
Vice-President, Banking Operations, Canadian Bankers Association
I guess those workers would need other jobs.
9:25 a.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
There would be a loss of jobs. Would there be an effect on consumers if companies started to leave?
9:25 a.m.
Vice-President, Banking Operations, Canadian Bankers Association
It might result in increased prices for the consumer, since there would be less competition. Again, I'm just kind of stating what I believe is the obvious. Unfortunately, I'm not Professor Hejazi, and I'm not speaking from that expertise.
9:25 a.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
But I appreciate your opinion. It means a lot. I think a lot of Canadians might agree with you.
In an article in The Globe and Mail last November, Jack Layton was quoted as citing a Université de Montréal study. It was entitled:
Les banques canadiennes et l’évasion fiscale dans les paradis fiscaux - 16 milliards de dollars d’impôts éludés.
That was from Léo-Paul Lauzon and Marc Hasbani.
He incorrectly suggested that “Canada's Big Five banks avoided paying $16-billion in income taxes between 1992 and 2008.” In that article, CBA's vice-president of communications, Robin Walsh, was quoted as describing the study as being “discredited by leading tax experts”. He stated quite clearly that:
Some foreign-earned profits and dividends are exempt from taxation in Canada because they have already been taxed elsewhere: otherwise these profits would be taxed twice.
Tell me what you think of this suggestion that the banks avoided paying $16 billion in income taxes. We believe that's incorrect, and I'd like your opinion on that.
9:25 a.m.
Director, Banking Operations, Canadian Bankers Association
It's fundamentally incorrect. The banks do not evade tax. The banks have paid tax in all the jurisdictions in which they are operating.
The inference being made is that somehow the fact that they are operating in jurisdictions that have tax rates lower than Canada's means they have evaded tax in Canada. That is simply not true.
9:25 a.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
What would happen to the banks if the corporate tax rate, as the Liberals are suggesting, were raised from 16.5% to 18%? It has everything to do with what we're talking about here today.
9:25 a.m.
Director, Banking Operations, Canadian Bankers Association
We are strong supporters of the government's plan to make the Canadian tax system more efficient and more competitive. We believe that helps all Canadian companies. We believe that helps Canadian entrepreneurs. It helps the economy grow. It helps produce new investment in Canada. It helps increase productivity, and that creates the high-paying, high-sustainable Canadians jobs for Canadians.
9:30 a.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
Aren't they friendly this morning, Mr. Chair?
Mr. Larin, we don't have time to do this today, but I would like to find out more about the best practices you addressed at your conference. In your presentation, you provide opinions and talk about your research, but there were experts from all over at the conference last June, and I would like to know if you have a document on best practices and, if so, if you would agree to make it available to us.
9:30 a.m.
Chairman, Research on Public Finance and Taxation, Professor, Université de Sherbrooke, As an Individual
It's possible. I will be pleased to send it to you if I have one. I will have a look in my archives. It goes back some time.
9:30 a.m.
Liberal
The Vice-Chair Liberal Massimo Pacetti
Thank you, Ms. Glover.
Mr. Larin, you can send the material to the clerk and he will make it available to committee members.
Mr. Mulcair, you have seven minutes.
9:30 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
Thank you, Mr. Pacetti.
My question is addressed to Mr. Hannah.
Madam Glover talked to you about a study by Léo-Paul Lauzon, and you gave a very specific answer. Did you read Léo-Paul Lauzon's study--yes or no?
9:30 a.m.
Director, Banking Operations, Canadian Bankers Association
I've read excerpts and the summary. I haven't read it in full.
9:30 a.m.
NDP
Thomas Mulcair NDP Outremont, QC
So you didn't read it. Thank you. That's what I thought when I heard your answer. You did not read it, but you have a hard and fast opinion about it.
Good morning, Professor Larin. It's a pleasure to see you here today.
When you addressed this question for the first time before the holidays, you explained to Canadians that the government's explanation, when it said it had signed an agreement, notably with Switzerland, should not be taken at face value. Your analysis was that there is some window dressing involved here. Since we're not in a classroom and 10 minutes go by very quickly, I would like to offer you some of my speaking time to continue your explanation of how you see this issue.