Finance Committee on Feb. 28th, 2019

[Trevor McGowan, Director General, Tax Legislation Division, Tax Policy Branch, Department of Finance]

Just so I understand the question, is it about the currently enacted laws of Canada, as well as our treaty network? There are anti-abuse rules in the Income Tax Act—there's section 245 of the act dealing with the general anti-avoidance rule—that were introduced a few years ago, which were intended to prevent the misuse or abuse through abusive tax avoidance transactions to obtain their tax benefits through treaties. Recent case law has been developed along those lines. It's not to say there's nothing in our current tax law that could address this type of planning, but the multilateral instrument is rather a coordinated international effort to address this sort of tax planning and to do so, as I said, in a coordinated and more effective way.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

You justify Bill C-82 by saying the new provisions will be more effective in combating abuses than the present act.

[Trevor McGowan]

There is within our general anti-avoidance rule a reference to the misuse or abuse of the provisions of a tax treaty. The multilateral instrument, just by its nature of being multilateral, with a number of countries involved, amends the application of the treaties themselves in a number of important ways. That was considered to be an improvement upon our current system.

I'll give you an example. The current general anti-avoidance rule applies where there's a misuse or an abuse of a treaty. The MLI, where it applies, would introduce an amendment to the statement of purpose of the treaties. Currently, I think it's fair to say that they generally say they are intended to prevent double taxation. The MLI would, in very general terms, clarify that they are also intended to prevent double non-taxation or to prevent the avoidance of tax. That clearer and explicit articulation of the policy underlying the tax treaties is intended to be helpful and supplement the application of both the treaty itself and domestic anti-avoidance rules like the one I mentioned.

It's not to say that currently we have nothing, but rather the multilateral instrument is intended to be an enhancement and an improvement upon the system, one that's done in a coordinated, multilateral way.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

To cite one of the first countries on the alphabetical list, Barbados merely signed the convention on January 24 but has done nothing since then. Time will tell whether it's serious about its actions and whether it will bring the convention into force. Otherwise the current system will prevail, as you confirmed earlier.

Approval of Bill C-82 is a step in the right direction, but our committee must be realistic and understand that the new convention will apply solely to those countries that take the necessary action on their end.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you. That's an accurate statement on Mr. Dusseault's part.

Mr. Richards.

[Blake Richards]

Thank you, Mr. Chair.

I want to read something first and then I have a question. I'm going to point out, Mr. Chair, that you're probably going to be a little itchy to cut me off on this—

[The Chair, Liberal, Wayne Easter]

Never.

[Blake Richards]

—but I'm going to point out that there is relevance here. You're going to just have to allow me a little latitude to get to it.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Blake Richards]

Yesterday, Ms. Jody Wilson-Raybould testified before the justice committee. I want to read little excerpts from her testimony, and then I'll indicate why I'm asking you about this.

She said, “For a period of approximately four months, between September and December of 2018, I experienced a consistent and sustained effort by many people within the government to seek to politically interfere in the exercise of prosecutorial discretion in my role as the Attorney General of Canada in an inappropriate effort to secure a deferred prosecution agreement with SNC-Lavalin. These events involved 11 people—”

[An hon. member]

Point of order, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Fragiskatos.

[Peter Fragiskatos]

On a point of order, Mr. Chair, is this really relevant? I'll be that direct. I don't believe it is. We're here for another purpose.

[Blake Richards]

Could I respond to that point of order, Mr. Chair?

[Peter Fragiskatos]

Could we continue the meeting and make use of our time?

[The Chair, Liberal, Wayne Easter]

I'm taking Mr. Richards at his word. He did forewarn us that the statement might be seen as non-relevant, but he said it would come to relevance, so I'll give him that leeway.

[Blake Richards]

Thank you, Mr. Chair, and it will, I assure you.

She said, “These events involved 11 people...from the Prime Minister's Office, the Privy Council Office, and the office of the Minister of Finance. These included in-person conversations, telephone calls, emails and text messages.”

Further on she indicated, “...on September the 19, I spoke to Minister Morneau on this matter when we were in the House. He again stressed the need to save jobs, and I told him that engagements from his office to mine on SNC had to stop, that they were inappropriate.

She said, “They did not stop. On September 20, my chief of staff had phone calls with Mr. Chin and Justin To, both members of the Minister of Finance's office, about DPAs and SNC.”

Those are the relevant quotes, because they obviously reference the Minister of Finance or his office in what Jody Wilson-Raybould and, I think, many Canadians would term as inappropriate efforts to try to advocate on behalf of SNC-Lavalin.

My question—and this is where the relevance comes in—is in relation to Bill C-82. Obviously, if the Minister of Finance and his staff felt somehow compelled to inappropriately lobby and pressure the then-Minister of Justice and Attorney General on behalf of and in trying to do something to benefit SNC-Lavalin in regard to the deferred prosecution agreements, one would have to wonder, would they then be willing to do the same on something such as Bill C-82?

The question would be, do you see anything in Bill C-82 that would potentially be of benefit to a company like SNC-Lavalin?

Also, was there ever any representation from the Minister of Finance or his staff made to you or any other officials in the Department of Finance related to Bill C-82 and with relevance to SNC-Lavalin?

[Trevor McGowan]

I can only speak to my personal knowledge, certainly not to any of the conversations between our minister's staff and anyone not in the department.

To answer your question, I'm not aware of any mention of SNC-Lavalin in the context of Bill C-82.

You asked, though, whether there could be any benefit under Bill C-82 for companies like SNC-Lavalin, Canadian companies competing abroad.

Of course there would be benefits under Bill C-82 for Canadian businesses. One that comes to mind is the improved dispute resolution process contained in the bill, including the mandatory binding arbitration, which can provide certainty for affected businesses involved in tax disputes with other jurisdictions that have also adopted that standard—not so much certainty as to what the outcome will be, but that in a binding arbitration there will be final resolution of a tax dispute and within a defined time period.

There are, then, benefits in this bill for Canadian businesses competing abroad, but they are of a general nature.

[Blake Richards]

Just for certainty here, are you indicating that you personally never had any representation made to you by the Minister of Finance or his staff about any benefits or what this might mean for SNC-Lavalin, or any implications or representations on behalf of trying to benefit them? Is that what you're saying? You personally didn't have any representation made to you in that regard by the Minister of Finance or his staff.

[Trevor McGowan]

I have not, but I don't wish to overstate my involvement in the development of the multilateral instrument. I was involved in the preparation of the legislation, or the bill, before the committee right now, but—

[Blake Richards]

Is there any way that you.... Obviously, especially given what you've just indicated, you may not have been the person who would have received those kinds of representations if they were made. Could you go back and provide us with an answer as to whether anyone in the department was in fact receiving these kinds of representations or lobbying from the minister or his staff on behalf of SNC-Lavalin? Is that something that you could get back to our committee on?

[The Chair, Liberal, Wayne Easter]

Just to step in here, I've heard several times now the statement “benefit SNC-Lavalin”. As I understand it in all the discussions I've seen on this issue, this issue is not about anything to benefit SNC-Lavalin. This issue—or the discussion—was over the implementation of a remediation agreement, which is a tool, legally under the law, that would apply full penalties to SNC-Lavalin in such a way—whether it's arrest of executives, fines or punishment in other ways—as would protect the economy in those areas where SNC-Lavalin operates and protect the employees and their pensions.

This is not a benefit to SNC-Lavalin. This would be a benefit of those innocent people who worked for SNC-Lavalin when the executives did whatever they did to break the law. I just want to make that point clear.

[Blake Richards]

I appreciate that you're choosing to engage in debate here, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

I am.

[Blake Richards]

I don't believe it's appropriate for you to do so as chair of the committee, and I certainly would disagree with your characterization of the fact that.... I think it would actually be found by most Canadians as quite laughable, in fact, that it would be indicated in some way by any member of the Liberal government that somehow this was not to benefit SNC-Lavalin, when it's quite clear that it's the case—