Thank you, Dennis.
I would like to draw your attention to what we view as a fundamental gap in the tax system that contributes to excessive tax avoidance in the industry, and can be easily closed without the industry having to breach accountant-client privilege, a privilege that is both a misdirection to this committee and a fiction, by the way.
We have examples both in Canada and the United States, and we've provided a document to the committee, an academic paper, on that. Attached to it are the details of various examples. In particular I would draw your attention to some cases in the U.S., starting at page 19, where “facilitators”—as Dennis has described them—conceive of, develop, get legal opinions on, sell, market, promote, and profit from tax products that have not been vetted by the Canada Revenue Agency.
Early on in my practice I was a labour and employment lawyer, and I had the occasion to negotiate wrongful dismissal settlements. In late 1999 and the early 2000s the questions of retirement allowance and deductibility came up frequently. I had occasion, as a first-year lawyer, to write to the CRA for an interpretation of a tax structure that we were thinking of in order to minimize tax for our wrongful dismissal clients. This is a well-known, oft-used function of the CRA. Any lawyer or any accounting firm can write the CRA and get an opinion as to the applicability of the tax laws to a plan.
What we see is an industry that is not using this function. In the United States it is an obligation under legislation to register all tax products. Again I can refer you to the same paper that makes reference to that law, but also the U.S. Senate standing committee had a report on this as well that describes it requiring all tax products to be so registered and vetted prior to being implemented.
Essentially Canadians for Tax Fairness believes it's time to prioritize the public interest over the cloud of secrecy and the confidentiality in the tax industry.
We have a number of recommendations that are included in our submission to you today, and I'll just briefly go through them.
The first is that the government should consider legislating a duty on lawyers and accountants under the Income Tax Act to report suspected avoidance and evasion, and to register all tax products. These aren't novel. Registering tax products is already in place in the United States, and the duty to report tax evasion and aggressive avoidance is already in place in the U.K. under the 2002 Proceeds of Crime Act. All lawyers and accountants in the U.K. who suspect aggressive tax avoidance, or evasion, have a duty to report that to the revenue agency, and a duty not to advise the client that they have done so. That's punishable by a jail term of up to 14 years.
In terms of registering, this could be CRA or an independent body of the Tax Court charged with giving these interpretations.
Second, we'd like to see an independent study of tax avoidance/evasion investigations initiated by CRA to ascertain the rates of penalties imposed, interest applied, rates of settlements reached, and convictions secured, by the amount of tax in dispute. From recent surveys in the press, even just yesterday, Canadians believe that there's one set of rules for the rich and another set of rules for the poor. We'd like to see the investigations that have been completed. How many lead to convictions when it's lesser amounts of money as opposed to higher amounts of money, based on those criteria?
Third, we'd like you to introduce a stop corporate tax dodging bill, building on MP Murray Rankin's previously introduced private member's bill, the economic substance bill.
Fourth, we'd like to see criminal investigations called in appropriate circumstances.
Fifth, we think this committee should call on the Office of the Conflict of Interest and Ethics Commissioner of Canada to investigate the highly unusual hospitality practices of senior CRA executives.
I'm a negotiator. I negotiate with Treasury Board officials. I negotiate contracts in my day job. I can tell you that Treasury Board negotiators know not to accept even a cup of coffee from me. We may go out, meet, and talk, but they'll buy their coffee and I'll buy mine. You don't buy drinks for public servants. It's a very clear rule.
Second to last, we'd like to see the government commence the long overdue legislative review of the Public Servants Disclosure Protection Act. This is the whistle-blowing act that applies to the public sector, and it needs to apply to the public sector and the private sector, as is the case in other Commonwealth countries, such as New Zealand.
I'm on the commissioner's public sector disclosure advisory board. This is four to five years overdue. Whistle-blowers need greater protection. They need to be rewarded for doing the right thing. They need to be encouraged to come forward.
Finally, we encourage this committee to continue this hearing and to call a number of witnesses, including U.S. whistle-blower Michael Hamersley and perhaps the professor who is the author of the article we've shared with you today.
Thank you for your time.