Finance Committee on May 3rd, 2016

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I have a few comments.

You mentioned the medical profession to the previous member as well, client-patient confidentiality, but I also often think about when there is a communicable disease or it's in the interest of society, doctors are actually obligated to report that information.

I was wondering what you believe the result would be on your profession if we allowed people to report tax avoidance or the breaking of tax law by others, and provided them with protection, allowed the person to retain 50% of the proceeds that might come from that tax avoidance or from the resulting difference, essentially whistleblower protection.

What do you think the outcome would be for your profession?

[Gregory Wiebe]

I'm not concerned about the outcome for our profession. I know that Canada does have a whistleblower regime in place right now, and other jurisdictions do as well, that's appropriate. I personally believe that 50% would be way too high, frankly.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

That would be a very good incentive though.

[Gregory Wiebe]

Well, it exists today. It absolutely does exist today and, as I say, I think Canadians should have the right to have a whistleblower if they feel that their neighbour isn't filing the appropriate amount of taxes. From a profession perspective, I have absolute faith in our profession and I'm proud of what we do. I'm fine with that.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

What if there were an accountant, for instance, who knew one of his clients was doing some tax avoidance and was probably worth $4 million and he could claim $2 million, perhaps he might have an incentive there to—

[Gregory Wiebe]

Oh, the accountant.

You know, one of the first things we make sure of is that we understand who our clients are and we do very thorough background checks to ensure that they have the right reputation, financial means, etc. for us to even deal with. We do not deal with clients who engage in tax evasion.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I have a few seconds left.

What's the average length of time that you stay with your clients? Do you know that information?

[Gregory Wiebe]

I don't know.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Would it be possible to find out, in Canada?

For instance, if your clients are with you for three years, five years, or 20 years, I think that determines, for me, a lot of things about what people's interests are. They might use you for a certain level of expertise and then drop KPMG later on, then do things by themselves.

[Gregory Wiebe]

This will be general, but I think individuals find someone that they know and trust as an accountant and I think they tend to stick with them.

I think the way multinationals look at the accounting profession today is looking for deep technical expertise, so what we're seeing in the business community is that there's more opportunity to use new accountants than there used to be.

[The Chair, Liberal, Wayne Easter]

Thank you both.

For the remaining time Mr. Liepert and Ms. Raitt will split their time, and Mr. MacKinnon and Mr. Champagne will split their time on that side.

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you, Mr. Wiebe, for being here. In my view, you've brought a very professional approach to your presentation here today and answered questions with a lot of confidence.

As a finance committee, we're also here at other times to probe and ask questions relative to a federal budget that was just introduced and saddled Canadians with a $30-billion debt going forward, and I'm sure glad that we're giving CBC another $675 million, because it looks as though they're using that money very well.

Mr. Wiebe, back in 2013 the Conservative government budgeted $30 million, and $15 million went to establish a new offshore compliance division with some 70 employees. I believe the CRA reported recently that in the 2014-15 fiscal year, over $1 billion in new revenue was derived because of that initiative. In this recent budget, as has been mentioned by our friends across the way, some $444 million over five years has been invested.

If you start to do the numbers, do you really feel that kind of expenditure is going to give the return that the $15-million investment gave?

[Gregory Wiebe]

I can't talk for CRA, because I don't know. I believe that CRA needs all the resources required to fulfill their duties, and that's important in society. Whether it's $444 million, $244 million, or $844 million, I wouldn't be able to tell you that, but I think it is important they get the resources they need.

If we as Canadians are expected to self-report, there needs to be a policing mechanism, and we saw a great return from the numbers you just quoted.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Right, but there is a diminishing return when you start to throw too many resources at it.

[Gregory Wiebe]

At some point there has to be, but I don't know what number that is.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Right.

I wanted to ask you another question. You made a comment earlier about our national tax system needing to reflect global realities. I'd like a little more explanation on that.

I'm from Alberta. I was interested to hear that you had formerly worked in Calgary, so you are familiar with the flat-tax system in Alberta. We woke up about a year ago to an NDP government that decided to tax high-income earners 50% more than the day before. We also have a federal government that has now decided it's time to slap the high-income earners with an additional tax.

I'd be curious to have your comments on whether or not you see those kinds of increases in personal income tax as a good thing for your business, where people are going to be looking for advice on how they can—I wouldn't say avoid paying taxes—more reasonably take home a little more than with the 50% that these two governments have now slapped on them.

[Gregory Wiebe]

We are not seeing any appetite from our clients for getting more aggressive from a tax perspective. As I said earlier, I do worry. I think there are some natural things that I look for as a tax professional in the tax environment. It needs to be simple, competitive, transparent, and anytime you get above 50%, it concerns me a little, especially with the competitor down south.

I think our corporate tax rates are at 26% right now. The OECD average is 23%. Ireland is at 12.5%. The U.K. has gone to 19%, and it's moving to 18% or 17%. We need to make sure we do not fall out of favour with multinationals by not being competitive, because frankly, they're the ones that move capital anywhere around the world. They can create jobs anywhere around the world, and—knock on wood—Canada's a good place to do business. I hope that continues.

[The Chair, Liberal, Wayne Easter]

Ms. Raitt.

A very quick one, please.

[Lisa Raitt, Conservative, Milton, ON]

Yes.

Former CRA employees who come to work for you at KPMG are still obliged to follow through on an oath that they take as an employee. What do you have in place at KPMG to ensure they are carrying out their oath?

[Gregory Wiebe]

In all of the employment letters, we ask them to explain what their legal obligation is to their former employer, whether it's CRA or anyone else. They have to list that. We also make it clear in the offer of employment that we expect them to fulfill their duties to their former employer. That's fundamental. Every year they certify that they have fulfilled those requirements. We take this very seriously. That's why we also have an annual certification to confirm that they have met those requirements.

[Lisa Raitt, Conservative, Milton, ON]

It's self-disclosure, though.

[Gregory Wiebe]

Yes, it is.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. MacKinnon and Mr. Champagne.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Wiebe.

I believe you said earlier that you don't accept contingency fees except in two cases.

[Gregory Wiebe]

We accept contingency fees for those two exceptions. Yes, we do.

We do indirect tax recovery work and we do R and D work on a contingency basis.