Evidence of meeting #105 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was havens.
A recording is available from Parliament.
10:10 a.m.
Conservative
February 14th, 2013 / 10:10 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
Thank you, Mr. Chair, and thank you to the witnesses today.
I was astonished, Mr. Howlett, until Mr. Van Kesteren brought forward the information. We did hear testimony, and I'm not sure if you heard the first day...as Mr. Van Kesteren said, an amount of $173 million was identified in 2005, as far as tax cheats are concerned. Since that period of time, somewhere in the neighbourhood of $700 million has been identified per year. That's some four times as much under this government as the last government.
We have taken great steps, and I agree with you that there are amazing amounts of steps to go forward, and of course international agreements seem to be that....
Mr. Wrobel, I understand that to open a business bank account in Canada, people have to submit their articles of incorporation to the bank before they can do so. They have to submit that over 50% of the company is held by Canadian residents or Canadian directors, and in fact the articles of incorporation include controlling shareholders, the classes of shares, and things like that. So my understanding is that you can't open a bank account in Canada, at least at any of the chartered banks, without that information going to the bank so that they know who in essence is in control.
Is that fair to say?
10:15 a.m.
Vice-President, Policy and Operations, Canadian Bankers Association
I'm not familiar with that.
10:15 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
You're not familiar. It is the case.
Is there any advantage for banks to cooperate? For instance, Canadian banks that have holdings in other countries.... I believe in the carrot and stick analogy: you either use a carrot to get somebody to go in one particular way or you use a stick. Those are the only two methods that I've ever seen to be effective.
In this particular case, is there any carrot available for Canadian banks that actually cooperate, not only with regard to tax cheaters but to people who want to be tax cheaters? For instance, people come forward to bank managers and say, “Listen, I need to find a way to hide these funds or to transfer these funds out of Canada into your bank so that I can avoid those taxes.”
10:15 a.m.
Vice-President, Policy and Operations, Canadian Bankers Association
I think the big carrot is the fact that Canadian banks want to comply with the law. Legal risk is something that they are very mindful of, and also their reputation.
I want to take you back to the global financial crisis. We always ask ourselves, why did Canadian banks do so much better than others? It's because they managed their risks. There's an element of risk to tax evasion. If we encourage, if we facilitate, those kinds of behaviours, there is a great deal of risk that the bank is subjecting itself to—
10:15 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
I understand that, but with respect, as long as you abide by the laws in Canada and you abide by the laws, for instance, in the Cayman Islands, does that satisfy you, or does it satisfy your members? Do they actually identify people who approach them to try to avoid taxes? There is a difference between the laws in Canada and the laws in other areas, and obviously they encourage you to invest in those areas, but with what's happening with the global economy, we're reaching out. We're getting the tax treaties—as has been mentioned, some 100 agreements. We're moving forward with that aggressively to make sure we get rid of those tax cheaters, those tax avoiders.
10:15 a.m.
Vice-President, Policy and Operations, Canadian Bankers Association
We've heard today examples of banks that have been cited in the press for that kind of behaviour—clearly in support of tax evasion. We do not want to have our name in the press.
10:15 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
Do your members have a policy to report people who try to avoid tax?
10:15 a.m.
Vice-President, Policy and Operations, Canadian Bankers Association
Again, I couldn't tell you about the—
10:15 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
Could you provide information to the chair as to whether there is a policy for the banks in Canada to report people who are trying to avoid taxes, not just in Canada but in other countries where you operate?
10:15 a.m.
Vice-President, Policy and Operations, Canadian Bankers Association
I think I said in the opening remarks that individual banks have procedures in place whereby they monitor the behaviour of their employees—
10:15 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
I understand that, but I don't have enough time, to be honest. I'd ask you to provide information to the committee concerning whether or not they do exactly that: report people who attempt to do so, and not just people who do so. Obviously, there is a difference.
The other question I have is, who are these tax cheats? We've heard that there are large multinational corporations, medium-sized enterprises across the world. Who are they? Are they the largest companies? Are they the smallest companies? Are they individuals? Who are they?
Actually, I would ask Mr. Cockfield to respond to this.
Mr. Cockfield, could you identify what would be your norm?
10:15 a.m.
Prof. Arthur Cockfield
Are you referring to tax evasion or tax avoidance?
10:15 a.m.
Conservative
10:15 a.m.
Prof. Arthur Cockfield
Obviously, there is the criminal element: folks laundering money, using the conventional financial system to clean up moneys derived, let's say, from the illicit sale of narcotics. Then you may have the business person who has stashed away cash in millions of dollars.
Because of the secret nature of the system, I unfortunately can't give you what I think would be a generic profile. I think it would be all sorts of folks—very wealthy, mid-level wealthy—but again, it's impossible for me to estimate.
10:15 a.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
Mr. Murphy, do you know, or would it be all speculation as well?
10:15 a.m.
Director, Tax Justice Network
The report we produced last year, The Price of Offshore Revisited, looked at this issue and basically said that at the end of the day the biggest problem is with high-net-worth individuals. Those are people who have free assets of more than $1 million.
Actually, the real core problem is with those who will have assets of much higher value than that, who will be relocating assets using complex structures. They will be assisted through the financial services system to hide the value of those assets in a way that either avoids or sometimes will evade. That will also depend upon the person's own priority; avoidance tips into evasion when you don't disclose.
But it's individuals more than corporations. Large corporations don't evade; they avoid. I don't think we should be presuming that there's a culture of evasion in large companies. I don't think that exists.
10:20 a.m.
Conservative
10:20 a.m.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Thank you very much.
I want to talk specifically about tax havens. I'm going back to some of these small places, which have very small economies and where there are large amounts of money invested.
Over the last 10 years, Canadians have invested about $390 billion in Barbados, which has a population of 284,000 people. They invested $175 billion in the Cayman Islands, which has a population of 55,000. Obviously, some of that money is absolutely above board and legitimate. But the money that is not legitimate means that the average middle-class family gets hammered and ends up paying more in taxes, plus getting less in government programs and services, than they would otherwise get if this money were adequately reported and taxed.
We know that there was some disclosure, through whistleblowers, of the Swiss banks. That brought money that was disclosed in Germany, and a number of Canadians were found to be holding money in Swiss bank accounts.
Aside from having whistleblowers, my question is, how effective are the TIEAs in tracking down and finding this kind of information? What record of compliance have we had, and what moneys have been found and greater taxes paid through these international agreements?
Would anyone care to comment on that?
10:20 a.m.
Director, Tax Justice Network
For all practical purposes, tax information exchange agreements are completely useless. Signing one is a complete waste of time. You will discover that some place like Jersey, which has 50% of its economy dependent upon financial services and has had a TIEA with the U.S.A., for example, since 2002—one of the first there was—has so far exchanged less than one hundred pieces of information on $400 billion worth of assets located in Jersey.
For all practical purposes, that means they are absolutely impossible to use, and even when information is supplied, the quality of that information is normally very low, because you have discovered that actually the bank does not really know who the beneficial owner of the asset is.
