Evidence of meeting #17 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was kpmg.
A video is available from Parliament.
Liberal
Steven MacKinnon Liberal Gatineau, QC
My question is about mergers and acquisitions, and has two parts.
First of all, do you accept a percentage of an agreement or transaction on a contingency basis with respect to savings?
Second of all, could you comment generally on international mergers and acquisitions? Are those transactions really based on achieving a more effective and efficient tax structure for the new entity?
I'd like to hear your thoughts on those two questions.
Partner, KPMG
The M and A work that we do is generally on an hourly basis with a cap. That's just the way the industry goes. As far as M and A that's being driven by tax issues, the best example is probably the large deals that have happened recently in the U.S.
The U.S. has a very expensive and unique corporate tax system. It's much more expensive than that of any other jurisdiction. Many U.S.-based multinationals are trying to escape their taxation system. They find a business outside the U.S. that they can merge with, then they move their head office and operations to that location. They do this because it's so expensive in the States.
That gets us back to the concept of being tax competitive. Right now, Canada compared with the U.S. is very tax competitive. That's why you've recently seen businesses making certain M and A deals that move their headquarters to Canada. I think that's very good from a Canadian perspective. Encouraging U.S. multinationals to put their headquarters in Canada, so as to take advantage of our more competitive tax situation, is fantastic for our country.
Liberal
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
Mr. Wiebe, we've made a historic investment to combat tax evasion. I'd like to draw on your 30 years of experience. Give me three best practices that governments have implemented around the world that would be effective in reducing tax evasion. We'd certainly be interested in this. The money we're going to be investing is to put in place the tools, the system, the technology. I'd like to draw on your experience. You have 30 years of experience as the head of international taxation. What are the three most effective measures in combatting tax evasion?
Partner, KPMG
We have a few of them in Canada right now. First of all, many jurisdictions have listed attributes of transactions that they don't like. The U.S. has a whole list of things they don't like. The U.K. has something similar. We have our tax shelter legislation, which says that CRA has to be notified where there's a contingency fee, a confidentiality agreement, or something designed for a tax benefit. I think that is very important.
I also think that a lot of it just comes down to the effectiveness and attitude of the tax authority. There are tax authorities around the world that engage with taxpayers and tax advisers. If they say they don't like something and they're going to go after it, this changes behaviour immediately. If we're sitting at a conference somewhere, and they say there's a plan out there they don't like, the plan doesn't go very far forward after that, even if the technical rules would suggest that maybe they're wrong.
It's that ongoing engagement with the taxpayers and the tax authorities about what they feel is right and what they don't feel is right. Being reasonable and proportional and professional in all situations, that makes a big difference.
Liberal
François-Philippe Champagne Liberal Saint-Maurice—Champlain, QC
What you're saying is that the signal that the government has given recently that we're going to go against combatting tax evasion is an effective way to indeed reduce tax evasion?
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Mr. Chair, I'd like to ask the committee if I might have the privilege of asking the witnesses a quick technical question.
Liberal
The Chair Liberal Wayne Easter
Yes, we will allow a quick technical question because we do have to adjourn.
We'll give you one question.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you kindly.
Could you give us an approximate idea of how much, in dollars, is transferred back to Canada from tax havens by your clients?
Could you give us a breakdown, in terms of individuals, companies, and banks?
Partner, KPMG
To the best of my knowledge we have no tax shelters that we sell to any of the three types of clients that you talked about. We do tax planning. I wouldn't be able to tell you the relative fees with respect to that. The tax shelter regime in Canada is something that we're just not a part of.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Ste. Marie and Mr. Wiebe.
We thank everyone, especially the witness, for the calmness of this discussion on what has been quite an explosive issue in this country. We get many calls in our offices.
We shall suspend and go to committee business in about five minutes.
Thank you, Mr. Wiebe and Mr. Jamal.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I have two or three questions, and I'll need the answers to be short.
First, Mr. Chair, you ruled that Mr. Dusseault's motion was out of order until the committee could discuss it during this portion of our meeting. Is that correct?
Second, without asking you to rule on the matter right now, I'd like to know whether you think it would be out of order or whether you think we would be able to discuss it.
I may have a third question, but that will depend on your answer.
Liberal
The Chair Liberal Wayne Easter
All right. I think we can debate it based on some of the advice coming forward from some of the people on the legal end of things at the clerk's office.
If you were to turn to the information that was provided to us by the Library of Parliament, they indicated that:
For the purpose of ensuring compliance with the [Income Tax Act] on 12 February 2013, the Minister of National Revenue applied for a court order against KPMG LLP...requesting that KPMG provide the CRA with certain client information. The court order, which was awarded on 18 February 2013, was immediately challenged by KPMG. [That] challenge is currently unresolved.
Now, if you turn to the sub judice convention, which I originally thought we would be in violation of—and we still could be—it says in the House of Commons Procedure and Practice that:
It is accepted practice that, in the interests of justice and fair play, certain restrictions should be placed on the freedom of Members of Parliament to make reference in the course of debate to matters awaiting judicial decisions, and that such matters should not be the subject of motions or questions in the House.
Your motion is getting pretty close to that line in terms of the court case.
The people at the, we'll call them legal, basically said it's inadvisable for the chair to rule the motion out of order on the basis of sub judice. The imposition of the convention should be done with discretion, and when there is any doubt in the mind of the chair, a presumption should exist in favour of allowing debate and against the application of the convention.
What I would suggest, Mr. Caron, in terms of the motion, is that it can be debated. We can debate that motion, but we should keep in mind what it says in the rule and procedures. I really think we're really pretty close to the line.
Go ahead, Mr. MacKinnon.
Liberal
Steven MacKinnon Liberal Gatineau, QC
Point of order, Mr. Chair.
I believe there were motions filed with the committee with notice. In terms of ordering our committee business today, in what order should they be considered?
Liberal
The Chair Liberal Wayne Easter
The motion that Mr. Dusseault brought forward earlier is allowable because it was in reference to the discussion that was on the table with the study we're doing at the moment on KPMG and CRA. That motion, I would say, is on the floor first, and then in this session we will quickly deal with a couple of items on budget for the committee and then go to motions that have been given notice.
Mr. Ouellette.
Liberal
Robert-Falcon Ouellette Liberal Winnipeg Centre, MB
I have a quick question. I'm not very familiar with this. If we request this, it's already before the courts, and they have refused to provide it to the government. Could they then refuse to provide it to us? Then what recourse would we have as a committee to then request that information? Would we have to start a court case as well or would we have to call them to the bar, or whatever the terms are, or call them back to explain their conduct? What would be the repercussions?
Liberal
The Chair Liberal Wayne Easter
I don't have the answer to that question. We can probably obtain it from people.
Mr. Caron.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I realize just how sensitive the matter is, and I think we need to be careful. I also realize that the minister and department have taken legal action, but the fact remains that our committee made the decision to study the KPMG and Isle of Man issue. The committee did that so it could get to the bottom of the situation insofar as that was possible.
If the department's request is ultimately granted by the courts, it doesn't mean that the committee will have access to the information, making it difficult to continue the discussion and study that we, ourselves, decided to undertake.
Another legal consideration we have to take into account concerns the five individuals whose case is still pending. We are prepared to accept that getting the names of those individuals would be difficult, so an amendment to exclude those five names from the list requested by the committee would probably be called for. But if the committee is serious about getting to the bottom of the KPMG and Isle of Man issue, we should vote in favour of the motion and see what KPMG decides to do in response to the committee's motion and request.
Let's not forget that Mr. Wiebe told the committee that any illegal tax manoeuvres by employees had to be reported, and I think the scheme that has come to light could clearly be qualified as such. That's why I don't think KPMG will necessarily refuse to hand over the list of employees involved.
As for the witness list, it's essential for the committee to do its work.
I would suggest we examine the motion in its current form, while being open to possibly removing the names of the five individuals whose case is before the court, if the committee members were in agreement. It is our duty to vote in favour of this motion so the committee can continue its examination of the issue.
Liberal
The Chair Liberal Wayne Easter
Okay, I'm going to turn to Ms. Raitt.
Madam Clerk, you'll have to correct me if I'm wrong, but I'm under the assumption that the motion is on the table. Does it need to be removed? The motion is on the table.
Ms. Raitt.
Conservative
Lisa Raitt Conservative Milton, ON
While I understand what my friends are attempting to do in terms of moving the ball down the field and getting to the bottom of an issue, I have a concern. The terminology “compel” is more than just requesting. It says that we must take, in my view, every action possible, which could include litigation. I don't think we can make a decision that includes the possibility of litigating whether or not Parliamentary privilege has a higher calling than solicitor-client privilege or client privilege—whatever the terminology is for KPMG—in terms of protecting interests. I don't know whether or not that's a legal battle that this committee is fully understanding the ramifications of, and we should have legal advice before we take a decision to do this.
I know I'm being legalistic in my application to this. While I understand, as I said, the intent of it, I'm very concerned about the long-term, long run costs associated with doing this. My suggestion would be to wait until the end of the court proceedings and then compel CRA, through the government, to provide us with that information, if that's the route and that's what the intention is. Up until that time I have great concerns about having a finance committee try to go through the hoops that would be necessary in order to get KPMG.... They will litigate this until they have exhausted every line of appeal because they have to in order to protect their reputation of protecting information, so we're going up against a large brick wall, Mr. Chair, and while I applaud and appreciate the intention, as I said, the process with respect to this is too onerous, too difficult, and too expensive.
Liberal
The Chair Liberal Wayne Easter
Just to answer in part the point that you and Mr. Ouellette raised, Ms. Raitt, I'm told that if we didn't get the information, the recourse would be for the committee to report back to the House that they did not obtain the information they had requested. That's what I'm told by the people who are involved and have experience in these kinds of ventures, that the committee would report back to the House that they did not obtain the information they had requested. In any event, the motion is on the floor.
Conservative
Lisa Raitt Conservative Milton, ON
If it's a request, it's a different motion, and it's a different analysis. Compel is very difficult.