Finance Committee on Feb. 19th, 2015

[Hendrik Brakel]

Yes, we were thinking of it as a possibility. I was speaking to some folks at the Bank of China about a Canadian company that wanted to invest in China. Instead of borrowing Canadian dollars, converting to renminbi, and making that investment there, they could issue bonds in renminbi the same way B.C. or EDC did, raise the funds in renminbi, and make the investment overseas.

Even better, because we're the only jurisdiction in the Americas that has it, what about a Brazilian company that wants to invest in China? They could do that through their Canadian bank partner, like Scotia or whatever, that's very active in Latin America. Wouldn't it be cool if Canada became this conduit or was able to raise funds in renminbi? We would really love to see a Canadian company—

[The Chair, Conservative, James Rajotte]

With respect to Canadian companies doing share offerings on the Canadian exchanges, do you see mainland Chinese investors using this as a tool to invest...?

[Hendrik Brakel]

A lot of mainland Chinese companies and banks, particularly the banks, are listed already in Hong Kong, and I think there are a couple of Chinese companies that are listed in New York. I'm not an expert in this. I think we might see more but I'm not sure it makes a big difference.

[The Chair, Conservative, James Rajotte]

Mr. Harder, do you have a brief comment?

[Peter Harder]

I think that they would.... This is more on transactions than on investment, but I'll look at it.

[The Chair, Conservative, James Rajotte]

I appreciate that. I wish I had more time to go into that, but we do have three motions here we have to deal with today.

Thank you so much to our witnesses for a fascinating discussion. If you have anything further you wish the committee to reflect upon please submit that to the clerk and we'll make sure they get it.

Colleagues, we'll suspend for a minute or two to say goodbye to our guests, and then we will proceed with motions.

Thank you.

[The Chair, Conservative, James Rajotte]

I call this meeting back to order.

Colleagues, we do have three motions. We received Mr. Cullen's motion first, Mr. Dionne Labelle's motion second, and Mr. Saxton's motion third. We'll proceed in that order.

We'll start with Mr. Cullen, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Sure. I can give some context too.

The committee members have heard me talk about this motion before. We tried to construct it in such a way as to take any partisanship out if it or any angle out of it. It is certainly on the minds of Canadians I've talked to and Canadian businesses I've talked to. It is the state of affairs, the both positive and negative impacts on the resource sector prices that we've seen, particularly oil, but others as well.

I come from a mining sector in northern B.C., and we've seen a dramatic change in the prices. I know Mr. Cannan as well would...aside from wine there are some other things that happen or don't happen. An understanding of where the Canadian economy is would be appropriate. I'm glad about the government's enthusiasm for the PBO report and the veracity of their undertakings. It's a good tone.

Mr. Brison—and I know he's not here today—had some notions about amending it. We are of course open to amendments.

As well, not to speak too much to Mr. Saxton's motion that's coming, but I know that at a public safety meeting a motion almost identical to this has been moved to look at the terrorist financing issue, which I know is important to the government and obviously to the minister who sent us a letter. We try to do give and take. We talked—Mr. Keddy was in that conversation before—in terms of how the committee structures itself and what our agenda is. We think this is a high priority for Canadians and a high priority for the government.

I want to emphasize that we've tried to construct this in such a way that it will be informative to members of the committee and all parliamentarians. More broadly, we want the Canadian public and Canadian businesses to understand what the impacts are going to be of what seems to be a relatively stable price on oil, as well as the impacts we're hearing about in the manufacturing sector.

It's a repetition of a pitch I've made to members before. I know the Liberals have expressed support before. We look forward to doing this and getting on with the work.

[The Chair, Conservative, James Rajotte]

Thank you. Is there further discussion?

Mr. Saxton.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thanks, Mr. Chair, and I thank Mr. Cullen for his proposed motion before the committee.

I just want to remind my colleagues that the finance department is studying the impact of oil price fluctuations on the Canadian economy. The Parliamentary Budget Officer has also done a study on this. The Governor of the Bank of Canada has also done a study on this, so it is being studied in a number of different places. We feel that there is another very urgent priority for this committee to look at. I'll bring that up when my motion is discussed later.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Cullen, it's your turn again.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I know we're combining a couple of conversations, but I'm not sure if Mr. Saxton heard when I initially introduced this that an incredibly similar but not identical motion has been moved at the public safety committee, which will be dealing concurrently with C-51 when it leaves the House. We don't have a sense from the government if that's going under time allocation, but it's been imagined today already. So that committee is dealing with the broader aspects of terrorism and terrorist financing. It seems like a natural fit to a committee that's already engaged in changing Canadian law around terrorism and anti-terrorism measures.

The Governor of the Bank of Canada did do a study on this and then acted. That was part of the point. The bank surprisingly lowered the lending rate, which was surprising to the markets. No one predicted it. If the finance department is studying this, one wonders why it isn't also engaged in studying terrorism financing, if that's the first priority.

I'm a bit befuddled, Mr. Chair. It's a bit of a strange moment, I suppose, when it's New Democrats who are asking to study the economy, particularly the impacts on the oil sector, which we think is very important, and we have Conservative colleagues across the way saying it's not as important. I suppose it's just a moment in time for the dynamic of this government, which spent a great deal of energy, effort, and time talking about oil in particular and the economy at large. This is a motion that we are willing to amend. However, simply saying that others are doing the work.... Again, I'm glad for the government's new-found enthusiasm for the Office of the Parliamentary Budget Officer, and not seeing them in court maybe on their particular assessment of the economy.

My point is this. If there is a reason why, and the government says it has new coherence and understanding about what the impact of low oil is on the Canadian economy, I would love to see it.

I think this is exactly what the finance committee should be doing. I think this is what Canadians would be looking for us to do, and if we're able to have an undertaking of terrorist financing, which is an important issue for all Canadians, done at the committee that is dealing with terrorism issues, then it's complementary, certainly.

I would urge the government again to rethink its stated position on this, and there is give-and-take that happens at committee. We are spending four days on the renminbi. That was something of the government's interest. We've had this throughout the history of this committee. This is an important issue to study. This is an important issue, I would assume, for government members to understand, as well.

I'll end on this, Mr. Chair. I truly want to know what the impact is on the manufacturing sector of an 80¢ dollar. Are we picking up the gravitational pull from a helpful U.S. economy that's performing GDP-wise at twice or so the rate that we are, or are we not? We had some significant manufacturing losses. Are those losses being picked up? We are hearing conflicting signals from some in the manufacturing sector as to whether this is good or not and whether they are going to replace some of those jobs. We've seen recent reports out of Alberta and some of the other provinces impacted by oil prices that the housing market is being impacted. How?

I dare say that nobody around this table fully understands and appreciates what that impact is on the Canadian economy. If the next election, and what we're engaged in, is about the economy, which everyone tells us, then why not understand it? Why not get to this motion? Why not simply accept it? Again, we are open to amendments. We are open to a focused debate on this.

I want to say one last thing. I was given some concern that this motion had been discussed and issues had been discussed. I'll note that the finance minister's letter to us was also given to the National Post to ensure there was some public commentary on this before the committee had a chance to review it. It's somewhat concerning to me and some others that, after being so properly chastised by some of my colleagues across the way, the next thing the government did was send its intentions for this committee out to the public through a national newspaper. There we have it; do as I say, not as I do.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Cullen.

Mr. Côté, you have the floor.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

I have to admit, Mr. Chair, that Mr. Saxton's remarks disturbed me somewhat.

He almost seems to be suggesting that the work of the Standing Committee on Finance is of little importance. And yet we deal primarily with the directions we will take, the budgets we adopt and issues related to the economy. This is fundamental.

The fluctuation in the exchange rate of the Canadian dollar against the American dollar is of course one of the very numerous consequences of the decline in the price of oil. Another is an increase in the cost of fruit and vegetables imported from abroad. This has a direct impact on middle-class families. That is a very specific example among many others, and with all due respect to the work of the Bank of Canada, the Department of Finance and other organizations, our committee must get to the bottom of this and analyze it all. We have to define or at the very least try to see where we are headed with all this.

The last Monetary Policy Report of the Bank of Canada was extremely clear. Indicators showed that Canada's position is not very competitive in the face of the challenges posed by the decline in the price of oil on world markets. This is causing a transition in our economy and in activities in various parts of the country. It is important for the people of Alberta, among others, to know what is going to happen to them and what we are going to be able to do to help them with the challenges they face. The same thing applies to the people of Quebec and other parts of the country.

So I absolutely do not understand how anyone can minimize the interest of the topic my colleague Nathan's motion proposes we study.

I will conclude with that.

[The Chair, Conservative, James Rajotte]

Very well, thank you.

Mr. Dubourg, you have the floor.

[Emmanuel Dubourg, Liberal, Bourassa, QC]

Thank you, Mr. Chair.

I would also like to say a few words about the motion tabled by my colleague.

In his introduction he said he was open to amendments. We do not intend to present amendments to his motion. We support it for several reasons. Among other things, there is the price of oil. In fact, in the House the Prime Minister spoke at a certain point about an economic crisis. I put a question to him on that and I did not receive an answer.

It is so important that the government decided to postpone tabling the budget. In the final analysis, we need this information so that the budget can be duly tabled. Now this has been postponed till April. We don't know if it will be tabled in the first part of the month of April or later.

Thus it is becoming increasingly important and urgent for the committee to meet witnesses and discuss these things. Mr. Saxton stated that the Parliamentary Budget Officer had carried out a study. That is very good and it is an indication, but even if the price of a barrel of oil goes back up to $80, that does not necessarily translate into stability.

I think it is important that we examine these points, all the more so since this situation has an impact on the manufacturing sector. I don't have to list all of the big businesses that are closing their doors or laying people off. We are talking about several thousand jobs.

We are in February. Since the tabling of the budget has been postponed till April, it would be interesting for the committee to consider this motion and undertake the impact study it proposes.

[The Chair, Conservative, James Rajotte]

I'll move to the vote on the motion.

(Motion negatived)

[The Chair, Conservative, James Rajotte]

We will now move on to Mr. Dionne Labelle's motion.

Mr. Dionne Labelle, you may go ahead.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you, Mr. Chair.

My motion reads as follows:

That the Finance Committee study how to combat tax evasion strategies used by some Canadians listed by HSBC's Swiss branch as secret account holders and which was made public by the International Consortium of Investigative Journalists.

Yesterday, Swiss authorities searched the offices of HSBC's Swiss banking subsidiary. The bank committed fraud, allegedly helping to launder terrorism- and drug-related money. We know that the details of some 100,000 secret accounts were leaked and that 1,859 of them belong to Canadian clients.

France undertook an investigation into the matter, and the country's public prosecutor will soon lay charges. Argentina has accused the bank of wrongdoing, and the U.S. has conducted an investigation. In the United Kingdom, a group of MPs will soon open an inquiry into the issue. Belgium, too, is investigating the matter.

The purpose of the motion is to let Canada do its homework and figure out what transpired. The point is to identify the methods and strategies people use to hide money in Swiss accounts. That is not to say that all 1,859 Canadian clients did something illegal. But, in France's case, the data revealed that the money in 94% of the identified accounts had not been reported to the tax man. That raises the question.

I think it would be useful to hear from witnesses who are familiar with these strategies. We could hear from experts. High-ranking officials obtained the list in 2010. The people who come to mind are Guy Bigonesse and Minister Blackburn, who asked the French authorities for the list.

We want to know what happened and how these people managed to hide their money from the Canada Revenue Agency. Why did they do it? What we're trying to do is figure out the strategies they used in order to prevent tax evasion in Canada through other channels. We want to know how it was carried out and what we can do about it.

Through its voluntary disclosures program, the Canada Revenue Agency managed to recover $28 million from 264 people on that list. What's happening with the investigations into the others on the list? Can we find out a little more about that? Did international intermediaries have a hand in managing the accounts of those 264 individuals who owed the unpaid taxes? Were there Canadian intermediaries? We want to get to the bottom of the entire situation.

This scandal is making its way around the world. Other governments are actively pursuing the matter. Canada, however, seems to be completely out of touch, hence the reason for this motion.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Dionne Labelle.

Mr. Keddy.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

Thank you, Mr. Chairman. Thank you, Monsieur Labelle, for your summation.

I'm going to give a fairly lengthy answer. You took some time to lay down the parameters of your motion.

The reality is that we do have a very good record. The Government of Canada has a very good record of combatting international tax evasion. Let's be very clear that we know that record. Since 2006 we've audited over 8,600 international tax cases and identified $5.6 billion in additional taxes that are being collected.

Your numbers, with respect, are incorrect. I'm going to give you the correct numbers here today. When I'm finished with all the numbers and the actions we've taken as government, you'll be satisfied that actually this file has been handled extremely well.

To begin with, CRA became aware of the account holders of the HSBC accounts long before the International Consortium of Investigative Journalists did. You referenced Minister Blackburn travelling to France in 2010. He personally collected this list from France's tax collection authority and since that time strong actions have been taken.

Contrary to the numbers in the media reports, the total number of files is 1,349 received from France related to HSBC. Of the 1,349 files received, 154 were duplicates and 801 were accounts that contained zero dollars. I'm giving you as much information as we have. The remaining 394 were deemed to be high-risk, high-dollar files. Of those files, the relevant accounts that have been reviewed have resulted so far in 200 audits that are either completed or currently under way. As a result of these audits, $21 million in federal taxes and penalties have been reassessed to date, and the compliance action obviously continues.

On top of that, CRA has receives 264 voluntary disclosures related to Canadians with HSBC accounts worldwide. The unreported income identified through these HSBC disclosures for this period totals nearly $123 million. To be clear, disclosures are only accepted by CRA if the disclosures are voluntary, meaning that the taxpayer cannot submit a disclosure if he or she becomes aware that CRA has audited them. They can't come in after the fact; they have to be proactive on their own part.

We also need to recognize that CRA was commended by the Auditor General for handling a separate list of Canadian taxpayers with offshore accounts, known as the Liechtenstein list, in his fall 2013 report on offshore banking.

Aside from the HSBC accounts, the government has implemented a number of tools over the past years aimed at cracking down on international tax evasion and aggressive tax avoidance. As a result, capacity to combat international tax evasions is stronger than it's ever been.

We included $30 million in 2013 for CRA to specifically target international tax evasion. We created an offshore compliance division that includes 70 full-time specialized auditors; the requirement for financial intermediaries, including banks, to report electronic transfers over $10,000; an offshore tax informant program, which allows CRA to pay individuals for information collected that results in federal tax being collected.

We strengthened the foreign income verification, or the T1135, which introduced new reporting requirements—

[The Chair, Conservative, James Rajotte]

Sorry, Mr. Keddy, the bells are going.

Colleagues, can we extend another five minutes and then we'll go to the House?

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

I will wrap this up very quickly.

[The Chair, Conservative, James Rajotte]

Okay.

[Gerald Keddy, Conservative, South Shore—St. Margaret's, NS]

What we've seen is a dramatic increase in the number of taxpayers using the voluntary disclosures program. Last year, for 2013-14, we received 5,248 disclosures for a total of $303 million in unreported income. For this year, 2014-15, as of February 1, we've received 8,795 voluntary disclosures for a total of $605 million.

The system is working. There's work to be done. We recognize that. For the HSBC case alone—that case is almost completed but is still under way—the numbers that were in the paper are incorrect. I've given you the correct numbers here today.

In 2006, voluntary disclosures were at 1,158. Today, they're at 8,795. Along with extra auditors, we have a system in place that I think is really showing that the CRA is doing a good job here. We've signed a number of tax treaties—92 tax treaties—and we have 22 tax information exchange agreements in force. Everything is in place to tackle tax evasion and tax avoidance in an aggressive way.