Finance Committee on Feb. 5th, 2013

[Brian Ernewein]

In fairness, let me first of all say that exchange of information has been a component of our tax treaty since before 2006. To be clear, it's the separate identification of TIEAs with non-treaty countries, sometimes termed as tax havens, that is the new element.

In relation to Liechtenstein, my understanding, without disclosing any taxpayer information and just talking about what's understood to be the case from the press, is that information came to the Canada Revenue Agency independently of a tax treaty with an exchange of information component or a TIEA. But now that there's a TIEA in place—well, when ratified—the Canada Revenue Agency would have the opportunity to use it to make specific requests to Liechtenstein for further information.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

A point of order, Mr. Chair.

[The Chair, Conservative, James Rajotte]

A point of order, Ms. Glover.

[Shelly Glover, Conservative, Saint Boniface, MB]

Mr. Brison was saying something about soap operas. I wasn't sure if he wanted to make that a little more public. If it was directed at me and insulting in any way, I would presume he'd want to apologize.

[The Chair, Conservative, James Rajotte]

Mr. Brison, do you want to address this point of order?

[Scott Brison, Liberal, Kings—Hants, NS]

Certainly.

A lot of Canadians enjoy sitcoms, and I don't think it would be insulting to compare an intervention to something one would see on a sitcom.

[The Chair, Conservative, James Rajotte]

Mr. Brison, I think we should ensure that we always address other members of the committee with respect. I would certainly ask you to do so.

[Scott Brison, Liberal, Kings—Hants, NS]

If any member of the committee were at all aggrieved by what I said, then certainly I would withdraw.

[The Chair, Conservative, James Rajotte]

Okay. Thank you for withdrawing that.

We'll go now to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

I also want to acknowledge Mr. Mai, who put forward this motion. I think all committee members feel this is an important subject and want to continue the study we started in the last parliament. Again, I thank him, in the interest of everyone, in terms of moving forward with this important issue.

If I look at the history, probably internationally and locally, we have made tremendous advances since the early 2000s, in terms of what global forums are in place, and our local strategy, legislation, and structure. I've seen tremendous advancement, but of course it always means there is opportunity to improve.

There are a few things I would like to focus in on, and one is a quick question.

Mr. McAuley, you talked about Liechtenstein and 106 names. Is it fair to say that all 106 were investigated? I mean, people can have money in other locations and it's not necessarily illegal.

[Terrance McAuley]

Mr. Chair, that is correct.

We did investigate carefully every name on the list. It was determined that several of the taxpayers had in fact reported and paid their tax. There were a couple of members on the list who were deceased. There were several names on the list where we found that the taxpayers were not actually the beneficial owners of the list. We identified all of the funds. We associated them to the taxpayers who should have been involved and we assessed them.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

My next question is on auditors and the importance of having auditors who are focused on this particular task. As I understand it, there was a bit of a restructuring. As I think most people know, when we restructure, for example, and we move the auditors to work more closely with public prosecutions, some people interpret it as a layoff, but in actual fact it is a restructuring.

Could you briefly comment on what was happening there and why some of those changes were made?

[Terrance McAuley]

Certainly.

Mr. Chair, we're always looking to ensure that our programs are operating efficiently. Our branch organized an evaluation study by our internal audit and evaluations group to look at our criminal investigations program, which had several component parts. At the end of that evaluation, it identified some opportunities for improvement. With that in mind, we struck a committee of senior members of our management team to look at how we could augment the program, and in fact that's what is playing out right now within the agency.

We're fine-tuning our criminal investigations program in particular. With respect to our special enforcement program, which is our civil audit, where we work quite carefully with the RCMP, we are incorporating that work back into our normal audit stream where we think it can be done more effectively and efficiently. It's really about fine-tuning the program, as opposed to changing the budget and changing the number of personnel.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Great. Thank you.

I think the NDP have talked frequently about the quantification of the tax gap, and I certainly recall...I believe it was Jeffrey Owens who appeared as a witness. He advised us to spend our time, energy, and resources on identification, the research, the moving forward. I believe he basically advised against...which is the approach that Finance has taken on this.

Is there anything you're hearing that continues to be the approach you believe is the best in terms of how Canada moves forward? Is there a need to quantify this focus on the identification, research?

[Terrance McAuley]

Certainly from the agency's approach, we move forward in terms of detecting, addressing, and dealing with these issues. To that extent, we deal quite extensively with the OECD and the various working parties involved in that group to share best practices and to incorporate those best practices. For example, with respect to aggressive international tax planning, we have members here in Canada who participate to identify schemes and produce lists of schemes so those catalogues can then be shared between countries to actually look at, detect, and address issues of aggressive international tax planning within their own countries. We find that it's a very effective approach as opposed to identifying the tax that is not identifiable.

[The Chair, Conservative, James Rajotte]

Very briefly, a question. You will have another round if you want, Ms. McLeod.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I'll leave it then. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. McLeod.

Ms. Nash again, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Chair.

We've been talking mainly about addressing tax evasion and tax havens in an enforcement way after the fact, which is of course very important. I'm wondering about the proactive prevention of these tax abuses in the first place. Can one of you tell me what are the best international practices that you would see as a model that Canada could follow?

[Terrance McAuley]

There are many facets, Mr. Chair, to your question. With respect to identifying aggressive international tax planning to the public, one of the major approaches that we're following is to identify to the public situations where we find aggressive international tax planning through our tax alert system, through any kind of media that we can possibly get that identifies that we do not accept that kind of practice. This was extremely successful in dealing with a problem that we had called gifting tax shelters. We were finding taxpayers involved in gifting tax shelters. Once we identified these, we enforced them. We identified that they were not acceptable. We told the public about them, and now gifting tax shelters are almost non-existent compared to where they were before. Communication is a very big key in moving forward.

[Peggy Nash, NDP, Parkdale—High Park, ON]

What is the international best practice that you would look to? Are there specific countries that are really what you would call models or that have best practices in terms of the prevention of abuse?

[Terrance McAuley]

We work extensively with the OECD, which has 46 countries at the Forum on Tax Administration, and we also deal personally with countries that are fairly well associated with us in being very mature tax administrations, such as Australia, New Zealand, the United States, the United Kingdom, France, and Germany. Our practices are closer aligned with some of the smaller countries.

[Peggy Nash, NDP, Parkdale—High Park, ON]

So those are some of the countries whose practices you would be examining more closely, to pre-empt this kind of abuse?

[Terrance McAuley]

Mr. Chair, I prefer to say sharing best practices, because we are also a provider of best practices to other countries.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Of course. Thank you.

Mr. Chair, I have a couple of minutes, so I'd like to take this opportunity to move my motion:

That the House of Commons Standing Committee on Finance recommend that the government extend Kevin Page’s term as Parliamentary Budget Officer until a thorough, transparent and competitive search for his replacement can be completed and his successor is appointed.

I so move.