Finance Committee on Feb. 5th, 2019

[Stephanie Smith]

Yes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

With regard to the covered tax agreement, which is articles 1 and 2, it says:

The OECD Explanatory Statement points out that a country might choose not to include a specific tax agreement if the agreement has recently been renegotiated or is currently under negotiation.

Can you clarify that in layman's terms?

[Stephanie Smith]

It's indicating that countries have the option of listing all or part of their treaty network, and is just giving one example of why a country may choose not to list a particular agreement. For example, I would say that includes the government's decision not to list Switzerland and Germany, because a decision was taken to bilaterally update those treaties.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Of course.

What about transfer pricing and multinationals, and how they act around the world? Does this agreement have any impact on transfer pricing?

I hope I didn't stump you there, Trevor.

[Trevor McGowan]

No. It's quite a complicated area. Of course, transfer pricing is the price charged by multinationals in their transactions. It's against borders. Whether the counterparty to an agreement under Canada's tax rules is in a treaty jurisdiction or not, our transfer pricing rules would require them to pay an arm's-length price for the goods if they are buying goods or services, or whatever they are paying for.

There are secondary rules in our transfer pricing rules that can create an amount that's essentially considered to be a return of profits, economically tantamount to a dividend and, as a dividend, subject to dividend withholding tax rates. Those withholding taxes could actually be affected by the presence of a tax treaty. That's a second-order effect. It would be incorrect to say that, no, it would not have any effect, but due to the nature of transfer pricing and the transfer pricing rules, I think it's fair to say that it's probably not the biggest impact coming out of the LMI.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

People can play.

Mr. Poilievre—talking about playing games.

[Pierre Poilievre, Conservative, Carleton, ON]

What, me?

[Voices]

Oh, oh!

[Pierre Poilievre, Conservative, Carleton, ON]

That is an outrageous allegation. I didn't say it was untrue; I said it was outrageous.

[Voices]

Oh, oh!

[Pierre Poilievre, Conservative, Carleton, ON]

On the same issue of transfer pricing, when governments have disputes with corporations over transfer pricing, and those disputes are settled, are the settlements made public?

[Stephanie Smith]

To my knowledge, when it goes through the treaty process through the mutual agreement procedure, I do not think the settlement itself is made public. To the extent that it's a public company, I suppose any changes in their public financial statements would be public, but it's a government-to-government process, and generally speaking those settlements are not made public.

[Pierre Poilievre, Conservative, Carleton, ON]

That's interesting.

What is the rationale for keeping them secret? If it turns out a company has been erroneously booking revenue in a foreign jurisdiction that ought to have been booked and taxed in Canada, why wouldn't we want the public to know that the company had attempted to do that?

[Trevor McGowan]

Our tax rules very generally have a fairly robust series of protections of confidential information and taxpayers' privacy rights. I know there are some international jurisdictions that are more inclined to publish all sorts of company tax information, and so on, for their taxpayers, but in general, any time the government seeks to make public information dealing with a particular taxpayer, whether it be an individual or a corporation, that's a very carefully considered exclusion to the general policy of not publishing people's tax information on their private affairs or on their tax situation.

[Pierre Poilievre, Conservative, Carleton, ON]

Shifting from corporate tax, which was the subject of my last question, to personal tax, in both percentage terms and dollar value terms, how much has the government collected from taxpayers with incomes above $202,000 for the last four years?

[Trevor McGowan]

I'm sorry, but we don't have that information.

[Pierre Poilievre, Conservative, Carleton, ON]

Would you commit to providing it? It should be easy to get, because it would be just the people who are in the top marginal tax bracket. Obviously, Finance and the CRA would keep track of receipts from people in various tax brackets.

[Trevor McGowan]

Is your question the total amount of government revenues from individuals in the top bracket? I think you said in excess of $202,000.

[Pierre Poilievre, Conservative, Carleton, ON]

That's right.

[Trevor McGowan]

You mean the total revenues from those taxpayers?

[Pierre Poilievre, Conservative, Carleton, ON]

That's right, in income tax.

[Trevor McGowan]

Or do you mean the marginal difference based on the increase from the new rate of 33%? I'm sorry, but I just want to make sure that we get the exact information you're looking for.

[Pierre Poilievre, Conservative, Carleton, ON]

My question was on the former, but if you could include the latter, I would welcome that also.

[Trevor McGowan]

So, it's total tax revenues from individuals—