Finance Committee on March 21st, 2013

[Russell Purre]

Yes, we're very much driven by what's taking place in the marketplace and internationally at a given point in time. If there are changes in that space, we obviously amend to that.

The one item I would add is when we talk about tax evasion, and our ability to detect it, which is very challenging from a technology perspective, we basically put the puzzle together to end up with that type of conclusion. The most common way, and I was speaking with my colleagues yesterday about this, we actually uncover tax evasion is our clients tell us.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Yes, I agree with that.

The U.K. has looked at a code of practice. I think Alistair Darling announced it in 2009 for the Royal Bank of Scotland and also Lloyds Bank. It was revealed by The Guardian, and this is a little different, that the Royal Bank of Scotland tied up £25 billion in international tax avoidance schemes, of which £500 million was lost tax revenue to the Government of the U.K.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Are any banks here in any kind of scheme?

I'm sure you're aware of what was happening in the U.K. In that particular case, they had a department set up to specifically avoid taxes and to allow some of the senior executives to pay taxes in other jurisdictions. Nothing like that goes on in any of the banks here in Canada, does it? Is that fair to say?

[A voice]

Absolutely not.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I can't imagine your saying anything else, to be honest.

[Voices]

Oh, oh!

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

We all know they're doing it. Something's happening here, and people are taking money they shouldn't take, and they're avoiding taxes, which makes everybody else pay more taxes, so they're stealing.

Do you see any benefit in a voluntary code of practice for the banks abroad, specifically relating to tax avoidance, and in particular for dealing with tax evasion? That would include self-reporting and possibly, or probably, some form of reward for the—

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean. Could one person answer that as we're over time.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Mr. Blackburn, would you mind answering that question?

[Steven Blackburn]

I believe there would be a benefit to that. I'm not sure exactly what that would look like. I think it would need to be thought through in detail.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Rankin, please, again.

[Murray Rankin, NDP, Victoria, BC]

Thank you, Mr. Chair.

I want to continue on Mr. Jean's line of questioning, if I could.

First of all, the premise is there's a lot of interest in going after individuals for tax evasion, but of course corporations are legal persons as well. I'm interested in what the CRA terms “abusive offshore tax shelters” or “abusive tax planning”, whereby corporations are using trusts and offshore corporations and subsidiaries, etc., essentially to go right up against the line of tax evasion, but probably trying to keep on the side of the angels.

Mr. Bartos, and others as well, in your subsidiaries in tax havens abroad, I wonder if you come across examples of where subsidiaries are going right up to that line, and you're suspicious. Does that trigger anything in any of your offices that you have to do something, that they may be over the line, but you're not sure?

[Scott Bartos]

First of all, HSBC in Canada is in a bit of a different position from my colleagues in the sense that we do not operate any wealth management or lending to businesses in any countries outside of Canada. I'd have to speak to HSBC Group. I'm not as knowledgeable about their practices.

[Murray Rankin, NDP, Victoria, BC]

All right.

Mr. Blackburn, could I ask you to comment on that, please?

[Steven Blackburn]

To the extent that we can, there are already mechanisms for sharing information among Canadian operations and subsidiaries in jurisdictions outside of Canada, albeit many of them are formal, based on the fact that we must comply with the respective privacy legislation and the respective other legislation that inhibits our ability to share.

However, as you may know, CIBC is the largest shareholder of FirstCaribbean International Bank and there are relationships between those two entities. While CIBC and FCIB are distinct entities, we have informal relationships between those entities that allow the sharing of information to the extent that it is not personal information, but which helps us identify transactions, individuals who may be suspicious.

[Murray Rankin, NDP, Victoria, BC]

All right.

Some of you have commented on TIEAs, the tax information exchange agreements, as if they were successful. We've had witness after witness tell us that these may not be as effective as we think in addressing the problem of tax havens. They tend to be one-off agreements which, once in place, are seldom used. The simple reason may be that we as Canadians need to know something to trigger a question seeking information exchange. That's why people have talked to us about the possibility of automatic tax information exchange agreements.

Ms. York, I know you're the expert on FATCA in your institution. I know we've certainly been well aware of the difficulties with FATCA as the United States implements it, but I'd be very interested in your views on whether or not we in Canada can craft a good automatic information exchange agreement to get around some of the problems I've mentioned.

[Nanci York]

We could. I think it would be a combination of working with the government and the financial institutions but also looking at it from a multilateral and multinational approach. I don't think one-offs solve the problem.

The OECD has recently signed off on the universal reporting schema. There's the basis for moving forward on global reporting and automatic exchanges, at least on the OECD level. I think that would be a very good place to start.

[Murray Rankin, NDP, Victoria, BC]

If, for example, Canada enters into economic partnership agreements, such as with Panama and other countries that some would define as tax havens, why couldn't we do it, rather than in a TIEA type of arrangement, an automatic arrangement, whenever we go into these particular agreements?

[Nanci York]

With the complexities of having so many different agreements, different standards, it would be very difficult, I think, to put in place the same automatic exchange agreement with every country that Canada would be looking to do business with or negotiate with.

Again, that would add to very different playing fields on a daily basis.

[Murray Rankin, NDP, Victoria, BC]

Does anyone else wish to comment on that?

Mr. Purre.

[Russell Purre]

I might comment further in terms of advising some caution with that. I say that because when you look at the success of the Canadian financial services industry in recent years, and think of new immigrants to this country, the flow of money into Canada, and how Canada has benefited from that, the idea that we would have an automatic information-sharing agreement with, frankly, some countries that don't have the same standards as Canada does, that's a two-way street.

The nice thing about TIEAs is that they provide a legal framework. That comes with pluses and minuses, obviously, but they provide a legal framework that ultimately protects the citizens of our country.

[Murray Rankin, NDP, Victoria, BC]

Well, if they're used, if they actually get used, I suppose.

[The Chair, Conservative, James Rajotte]

Thank you.

I'm going to take the next round as the chair.

I want to follow up on that, because witnesses who have come before us previously have argued that we should have automatic exchange of information between tax authorities in Canada and tax authorities in other jurisdictions.

The one example that others bring up, and that your institutions have brought up, certainly, with many members of this committee, is the problems with FATCA and in terms of a bilateral agreement.

Perhaps as a follow-up, Mr. Purre, do you oppose automatic exchange between our tax authorities and other tax authorities unless it's done in terms of a multilateral framework?

[Russell Purre]

[Inaudible--Editor]...TIEAs, and looking at a multilateral framework is the correct approach, ultimately, in terms of ensuring the ability of Canadian financial institutions, Canadians, and Canadian corporations to compete on an international basis.

Wherever we start creating a framework that is bilateral, ultimately we're creating inequities in terms of the ability of Canadian companies to compete on a global basis.