Finance Committee on Feb. 7th, 2013

[Judy Sgro, Liberal, York West, ON]

The bigger the group, the harder it is to come to any kind of real consensus, other than having meetings and meetings and meetings for the next 20 years and resolving nothing.

[Peter Gillespie]

Sure, but African countries are facing similar issues, so we don't need representatives from every African country. African countries are experiencing today, and for years, this problem of tax competition. A multinational mining company can come into a country like Zambia and negotiate.... In fact, in the case of Zambia, they negotiated several years ago royalty rates that were ridiculous: 0.06%.

The power that these corporations wield is driving tax rates down all through Africa. I think there are common interests that can be at the table without having everybody at the table.

[The Acting Chair, Conservative, Dave Van Kesteren]

Ms. Glover.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you very much.

I just want to clarify a couple of things.

Mr. Rosenbloom, I'm going to focus on some of the comments you made about TIEAs, because of course this government has moved forward in implementing them—I believe there are nine, now. Though they are just bilaterals at this point, in the absence of a multilateral agreement, I believe they have allowed us to recoup some of the tax information that has allowed us to recoup revenues.

I just want to make sure that when you were talking about TIEAs earlier, and saying that you really don't agree with them...which was odd, because you negotiated one. I just want to make sure that you agree that in the absence of the multilateral, a TIEA in place bilaterally is still better than nothing.

[H. David Rosenbloom]

Oh, of course. I didn't say I don't agree with TIEAs. My remarks were directed at the fact that I think they have limited impact because of the way they're generally implemented. They also have....

Sorry?

[Shelly Glover, Conservative, Saint Boniface, MB]

I'm sorry; I was just going to say that they do lead to the ability to retain that information that we otherwise wouldn't have access to. So then we do have the ability as a government to go after that tax that has been foregone, right?

[H. David Rosenbloom]

Yes, of course. Again, I don't know, even in my own country, what the experience has been, but my suspicion is that the number of requests that go out under any given TIEA in a timeframe, within a year, say, is pretty limited.

I think TIEAs are more important symbolically than they are practically. They're not going to end the tax haven problem. Let's put it that way. The countries that want to maintain tax haven processes.... Some of them actually have tax treaties beyond TIEAs. They have exchange of information provisions in tax treaties. I don't think that really gets to the heart of the matter. They have low tax rates. They attract investment from developed countries.

So I'm not against TIEAs in any way, shape, or form. I just think they're a relatively small part of the overall picture if we're talking about tax evasion and tax havens.

[Shelly Glover, Conservative, Saint Boniface, MB]

But they're better than not having them at all. I just wanted to make sure I have that from you.

[H. David Rosenbloom]

Oh, yes, of course.

[Shelly Glover, Conservative, Saint Boniface, MB]

Mr. Cardamone, you talked an awful lot about standardization. I know G-20 had a leaders commitment, a leaders declaration on standardization. I'm just going to read the quote for committee from the leaders declaration. It says:

We welcome the OECD report on the practice of automatic information exchange, where we will continue to lead by example in implementing this practice. We call on countries to join this growing practice as appropriate and strongly encourage all jurisdictions to sign the Multilateral Convention on Mutual Administrative Assistance.

Would you comment on why it's important that this be adopted and how you think it's going to help curtail tax evasion?

[Thomas Cardamone]

I think it could curtail tax evasion if countries actually follow what the G-20 suggests they do, which is to sign multilateral agreements. The G-20 countries have put that line in the sand. They understand the value of multilateral automatic information exchange agreements...[Technical difficulty--Editor]...comes down to political will. The questions is if governments are willing to stand up and say, yes, we want to be part of this type of a system, and we're going to say it publicly, and we're going to do everything we can to implement it...[Technical difficulty--Editor]...between what the G-20 suggests and what governments actually do.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

[Thomas Cardamone]

You need the first to get the second.

[Shelly Glover, Conservative, Saint Boniface, MB]

I absolutely agree.

In leading up to G-8 now, of course, what has happened in G-20 is important. So I think we're trying to get to the same result, which, as all of you have suggested, is a group effort from countries to try to come up with some standardization on the ability for us to move forward to deal with this.

Do you think one country can make a significant change in combatting the tax haven problem? I've heard clearly, I think, that international cooperation is required, but do you think there is something that you haven't mentioned yet that a single country can do that would have a significant impact, or is it just that we have to negotiate with our fellow countries to get this significantly improved?

Anyone who would like to answer can.

Go ahead, Mr. Cardamone.

[The Acting Chair, Conservative, Dave Van Kesteren]

We have limited time, so can I ask you to answer that in half a minute? Thank you.

[Thomas Cardamone]

Sure.

I think it's a combination of mechanisms that are going to push this agenda forward to curtail tax evasion. It's not only the multilateral...[Technical difficulty--Editor]...legislation in a particular country that can show leadership internationally.

So I think it's both things. As an organization, we promote both things. Not only do we talk to international bodies such as the G-8, the G-20, and the OECD, but we also talk to individual governments about what they can do in their own specific...[Technical difficulty--Editor]...one can influence the other, and an individual country can actually have a larger impact on what a multitude of governments do collectively.

[The Acting Chair, Conservative, Dave Van Kesteren]

Thank you, Ms. Glover.

Mr. Mai.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I have a question for Mr. Cardamone.

With respect to transfer pricing, some have suggested that multinational corporations should report on a country-by-country basis on all their transactions, such as labour cost, number of employees, finance costs like third-party and integral transactions, profits before taxes, provision for taxes, and taxes actually paid.

What is your position on the type of information we should have in terms of reporting on a country-by-country basis?

[Thomas Cardamone]

We fully support that recommendation on country-by-country reporting by multinationals. We think the impact on the companies themselves would be relatively low...[Technical difficulty--Editor]...given the information that would be provided to tax authorities, investors, as well as the general public. This information is already held by the corporations. It has to be a component of their consolidated global financial statements, so all we're asking is that this information be disaggregated by country.

Again, in and of itself, it does not stop abusive transfer pricing or tax evasion, but it is a mechanism, and hopefully, in concert with the other four or five...[Technical difficulty--Editor]...we make on transparency, it would provide an architecture upon which more information can be gained, and the ultimate...[Technical difficulty--Editor]...curtail the illicit flow of money and tax evasion.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Can you give us examples? Are there any countries that are actually pushing that forward or that have actually implemented such a reporting requirement?

[Thomas Cardamone]

There's no government that has requested or past legislation that would implement a country-by-country reporting standard. [Technical difficulty--Editor]...being discussed in a global sphere. The OECD is talking about it; other multilateral institutions have talked about it. It has gained quite a lot of...[Technical difficulty--Editor]...traction in two years. It remains to be seen if the political will is going to be put in place to actually get it implemented or not.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

What would be the reason not to? Is there any pushback from companies? What's your view on that?

[Thomas Cardamone]

Any change is uncomfortable, no matter whether you're talking about taxes or...[Technical difficulty--Editor]. Companies don't want to provide the information because they've never had to before. Many claim that it's an onerous financial burden on the company. That remains to be seen. I don't know...[Technical difficulty--Editor]...demonstrated by any company or not.

The important part of this is that it would be, if it's implemented as we suggest, a global standard so there is no one company or no one...[Technical difficulty--Editor]...unduly burdened by this. It would be all multinationals in all countries that would be required to do this.

So it's a matter of a relatively new idea beginning to get some political traction and some wider understanding, and hopefully, in the years to come we'll actually see a country-by-country...[Technical difficulty--Editor]...in place.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much.

This is a more general question. For reporting income, what are the most popular tax haven jurisdictions used by either Canadian corporations or foreign multinational corporations?

Anyone?

[Thomas Cardamone]

I don't know if there's any one particular haven used by American corporations, but we do know that 83 of the top 100 American corporations do have operations in tax havens. So it is a fairly widely...[Technical difficulty--Editor]...mechanism to shift profits overseas.