Finance Committee on Feb. 7th, 2013

[The Acting Chair, Conservative, Dave Van Kesteren]

Mr. Gillespie.

[Peter Gillespie]

My response also relates back to Mr. Del Mastro's earlier question.

The Tax Justice Network came up with an analysis, which they called a “financial secrecy index”. What they did was create a statistical formula to analyze the scale of jurisdictions around the world and the secrecy elements of those jurisdictions—whether they have signed agreements, whether secrecy is legally endorsed in those jurisdictions. The top five jurisdictions were Switzerland, Cayman Islands, Luxembourg, Hong Kong, and, interestingly, the United States, especially states such as Delaware, Nevada, and others. So those were the top five jurisdictions in that assessment.

[The Acting Chair, Conservative, Dave Van Kesteren]

Thank you. That's all the time for your round.

We are going to have time for one more question session. That would be Ms. McLeod.

You are up for about four minutes.

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

Thank you, Mr. Chair.

I really appreciate that this has been a great, wide-ranging discussion. I think it is important to note that, although we have flagged some very interesting issues around other countries such as Zambia, really our focus is domestically Canada and how we can protect our own system. But I certainly appreciate those very important comments made regarding other jurisdictions.

One of the things I did hear that I think all three witnesses agreed on is the talk about the ownership of entities and having better disclosure. I guess my question to all three of you might be this. Transparency seems to be important. One, are there any other jurisdictions that do require that kind of transparency? Two, as a follow-up to that, I would expect there are probably some times and some very legitimate reasons why corporations use this kind of structure, and it's nothing to do with the tax havens, etc., so I'd really appreciate some brief comments in terms of that particular recommendation that seems quite common.

Mr. Cardamone, do you want to start?

[Thomas Cardamone]

Sure.

There is no really good reason to keep the ownership of an entity secret. No one benefits from dealing with an entity where you don't know who is on the other end of the transaction. So...[Technical difficulty--Editor]...good example of why the ownership information should be kept secret from anybody.

We understand the desire and the need for privacy...[Technical difficulty--Editor]...concerns, maybe tax returns or financial dealings of the entity itself, but there is a difference between that type of privacy and the...[Technical difficulty--Editor]...that they were actually talking about, the fact that for these entities there is no linkage anywhere that tax authorities or law enforcement can use...[Technical difficulty--Editor]...the beneficial owner of many of these companies.

So I think this is the issue: it's a secrecy without a reason for it.

[The Acting Chair, Conservative, Dave Van Kesteren]

Go ahead, Mr. Rosenbloom.

[H. David Rosenbloom]

First of all, I think the principal problem that I am aware of in the United States with entities and their ownership is probably Delaware, which allows for companies to be owned with bearer shares. There has been a lot of complaint about that.

One of the problems I have in addressing this question is that you really do need to focus, in my opinion, on whether you are talking about individuals or corporations, because the problems are really quite different. Also, when you cite leading jurisdictions, as the Tax Justice Network has, again, I think the problems are very different between corporations and individuals.

I'm all for transparency. Whether we can achieve it in the United States, given our federal system, is a serious question. There are going to be restraints on how far the federal government—I'm sure this is true in Canada too, although I'm not an expert on Canadian law—can go in telling a state of the United States what it has to do in incorporating an entity. I don't think it's as easy as all that.

I will say this about the United States, and then I will turn it over. What people commonly forget is that even with regard to the entities in the United States in Delaware that are owned with bearer shares, the United States is not transparent, but those entities are paying tax. Believe me, they are paying tax. They are not avoiding U.S. tax.

The federal government has access to the information, and if it wanted to, I believe it would have access to the owners of those entities, if it wanted to. It's a burdensome process to get that revealed.

The real problem is the bearer shares that are issued by corporations in certain states, Delaware being the leading one.

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

Is there time for Mr. Gillespie?

[The Acting Chair, Conservative, Dave Van Kesteren]

You have about half a minute.

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

Well, then, I think we're pretty well at our end. Thanks.

[The Acting Chair, Conservative, Dave Van Kesteren]

I think that concludes our meeting.

I want to thank those who have contributed—Mr. Cardamone and Mr. Rosenbloom in Washington and New York, and Mr. Gillespie right here in Ottawa. This has been an excellent study. I think we could have probably gone on a little longer, but time demands that we march forward.

Next Tuesday we will meet here. We will be meeting with Governor Carney from the Bank of Canada.

With that, I would like to adjourn the meeting. Thank you.