Good morning, Mr. Chair. Thank you very much for the invitation to appear before this committee.
I've been with KPMG Canada for over 30 years and recently completed a term as KPMG international global head of tax. Before that, I was managing partner of KPMG Canada's tax practice and before that led our tax practices in Vancouver, Calgary, and in my home town Winnipeg.
We welcome this opportunity to help bring clarity and understanding to a number of issues that are important to us as Canadians and particularly the accounting profession, including our firm KPMG.
KPMG is an active member of CPA Canada, the body that sets and enforces the standards for more than 200,000 accountants in Canada. Every day, accountants across the country help their clients with all sorts of financial issues including helping them comply with the myriad of complex tax rules. Our firm has been serving Canadians for close to 150 years. Over those years, we have continually evolved our practices to meet the changing needs and expectations of our clients and society as a whole, a fact which is critical to this discussion.
Tax planning is an acceptable part of our tax system. As the Supreme Court of Canada explained in 2013:
Every taxpayer is entitled to order his or her affairs so that the tax payable is less than it otherwise would be. Taxpayers often engage in tax planning to achieve that result.
With that in mind, the Isle of Man tax plan, which has been subject of much discussion and media attention in recent months, was created in 1999 and hasn't been implemented for close to 10 years. To understand the facts around this particular plan, we need to try to put ourselves back in that environment 17 years ago. Simply put, we can't take a 2016 lens to look at a 1999 issue.
In the late 1990s, the approach to tax planning in our profession, and society as a whole, was different that it is today both in Canada and around the world. The fact is the late 1990s was a time when non-resident trusts were permitted under Canadian law as a matter of government policy.
In fact, they were encouraged by the federal government as a way for immigrants with financial means to come to Canada while keeping some of their funds abroad. It was in this environment in 1999 that this tax plan was created.
As is the case with all our tax plans, it fully complied with all applicable tax laws. We conducted extensive internal and external due diligence including going so far as to obtain independent legal opinions from leading tax experts both in Canada and in the Isle of Man. With this diligence in hand, we implemented this plan 16 times, of which 13 are known to the tax authorities. We haven't used one of these plans in almost a decade.
If we now roll the conversation forward to 2016, the world has changed for every business, including the accounting profession. We, too, have modified our business practices to meet the expectations of our people, our clients, and our communities.
For example, KPMG strongly supports and was proud to have been involved in the OECD-G20 base erosion and profit shifting initiative designed to allow jurisdictions to work together to lay the foundations of a modern international tax framework.
Further, we ceased offering the tax plan to clients many years ago because both our tax practice and the national and global context changed regarding acceptable tax planning.
We have done more.
By 2006, any significant tax plan required a review by independent partner committees regarding the general anti-avoidance rule, transactional tax matters, risk and reputation, and other areas deemed appropriate by our professional standards.
In 2009, we developed and deployed a global tax code of conduct, a document that sets forth the commitments we make every day to our people, our clients, the tax authorities, and our communities. It spells out our responsibilities as individuals and as leaders, and requires us to act as role models promoting ethical behaviour and ensuring that our actions serve to reflect our values.
Like every business, we've changed dramatically since 1999. One area where we have not changed, however, is the importance that we place on client confidentiality.
Client confidentiality is not just a KPMG issue, it is a cornerstone of the accounting profession. We have a legal and professional obligation to keep client information confidential.
As all of you can appreciate, if Canadians could not trust their accountants to keep their private business affairs private, there would be no accounting advice.
Client confidentiality is a key issue at stake in this debate. In 2013, the CRA applied to the Federal Court to require us to disclose the names of all of our clients who used this tax plan.
We opposed that order on principled legal grounds because of the precedent it sets around client confidentiality and the impact that precedent would have on our entire profession.
The existence of this ongoing litigation has resulted in us being limited in what we can and cannot discuss publicly, which in turn has led to an unfortunate imbalance in the depiction of our firm in the media. As inconvenient as it is for us, the principle is too important to the profession to forgo.
I'd like to conclude my remarks by talking about our team. KPMG Canada employs 6,400 employees in 40 offices from Victoria to St. John's. Globally, the KPMG network employs 175,000 people in 155 countries.
Our people in Canada and around the world come to work every day to help our clients with the business challenges they face. We help small business owners meet their payroll. We help Canadian businesses grow, expand and be successful internationally. We help protect Canadian investors through our audit services. We help Canadians meet their tax obligations and, finally, we help our communities prosper by volunteering our time and expertise.
Our people do all of this while living by the values of our organization. One value stands out above the rest. Above all, we act with integrity, including most importantly, acting within the law.
What is being portrayed in the media is not who we are. It is not what we stand for. We are incredibly proud of our team and the difference each of them make to each other, our clients, and their communities every day.
Each member of our team is committed to and supportive of the continued evolution of our world to a place where there's more trust in the role of government, the role of the accounting profession, and confidence by society in the fairness of the tax system both in Canada and globally.
We appreciate this opportunity to provide context and contribute to the ongoing discussion.
Thank you.
