Evidence of meeting #40 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was kpmg.
A video is available from Parliament.
4:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Let's back up a little here. I heard your point of order, Gabriel.
Mr. Julian, you made your point. You have about a minute left.
4:50 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
My question was very simple: How many client or shell companies exist? You said you don't use this anymore. Does that mean that you have dissolved all these shell companies or client companies, including Plantation Island, General Island, Sandy Point, First Land, Parrhesia that I mentioned earlier? Does that mean those companies no longer exist, or does KPMG still have shell or client companies as part of its portfolio?
4:50 p.m.
Canadian Managing Partner, Tax, KPMG
We do not offer the product. We have not offered the product since 2003. With respect to the specific client information, I cannot provide that. CRA has the names of all the clients, and we've provided them with each of the client bios.
4:50 p.m.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Ms. Iacovelli, I'm not asking for privileged information. I'm asking for numbers. You have access to those numbers. I don't understand why you are not being co-operative and answering these questions. They're legitimate questions.
4:50 p.m.
Canadian Managing Partner, Tax, KPMG
Mr. Julian, I believe that my colleague Greg Wiebe, when he was at the finance committee previously, indicated that we stopped offering the product in 2013 and that there were 16 implementations of that product.
4:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay.
We are going to have to go to the next round, which will be Ms. Jansen.
I think you do understand, Ms. Iacovelli, there will be some written questions coming your way.
Ms. Jansen, we're into five-minute rounds, followed by Ms. Dzerowicz.
May 6th, 2021 / 4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Thank you.
Mr. Cohen, how could transparency assist in the fight against tax avoidance and money laundering in our country?
I understand there are legal loopholes that allow for some entities to accept large overseas transfers without reporting them to FINTRAC. There are lawyers who talk about lawyer-client privilege. Some say they are the worst offenders. Would the beneficial ownership registry tackle that problem in any way?
4:55 p.m.
Executive Director, Transparency International Canada
Yes, a publicly accessible registry would do a lot to fight tax evasion and money laundering in a number of ways.
Currently, only financial institutions are required to do beneficial ownership due diligence by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Thankfully, we are seeing the amendments come into force in June, when all designated non-financial businesses and professions will need to do the same due diligence. That will include accounting agencies, money service businesses and real estate agents. Legal professionals do have to do that due diligence. Due to the Supreme Court ruling, they do not need to file suspicious transaction reports.
It does put a lot of pressure on all the professions to conduct the due diligence and now have the data. They can't say, “Well, I've tried with a client; I don't know.”
Once we have the registry in place it's very important that this data be verified through various methods so that all the various bodies that need to report, and even people looking to invest, like Ms. Watson, have the ability to do their own due diligence as well.
In a lot of ways, this will deter those bad actors from coming in the first place. Hopefully those who still want to game the system will be caught.
4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Thank you very much.
Ms. Daviau, you mentioned how CRA was criticized in the previous decade for focusing audits on small businesses and charities and how that impacted auditing work. You also mentioned in your testimony that the focus should be on wealthy individuals and powerful corporations who do the majority of the cheating. Is there a justification for the fact that CRA appears to be aggressively focusing on small mom-and-pop shops for audits during COVID and ignoring the wealthy individuals and powerful corporations you just identified as the real problem?
4:55 p.m.
President, Professional Institute of the Public Service of Canada
I actually don't think they're ignoring them; I just don't think they have the same capacity to address international taxes that they do to address local taxes.
I don't want to reiterate what those drawbacks are again, but certainly employees at the Canada Revenue Agency are up against, as I said, tax giants. These are people who have immense skill, technology, expertise and other big companies on their side. The CRA needs to be on a level playing field.
4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Okay. What I understand from what you're saying, then, is that domestic audits are much easier to chase than international ones.
I understand from your testimony just now that there is a lack of expertise among the team of auditors when it comes to international audits. Does that lack push auditors to work mainly on those less complicated cases, which would generally have co-operative business owners who are very easy to contact and follow up with?
4:55 p.m.
President, Professional Institute of the Public Service of Canada
There's actually no lack of expertise, but rather capacity in terms of organizational structure. What I talked about was that they had broken down the international tax units, which really took away their ability to realize synergy of working together and exchange of documents and information. These are very complex files, and they need to be set up a certain way and resourced to be able to attack them, and so those resources are now—
4:55 p.m.
President, Professional Institute of the Public Service of Canada
—part of generalized teams, and they just don't have the right tools to address it.
4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Right.
You're saying “capacity”. You don't have enough people, so instead you're going for the easy targets, which is really distressing to me, but—
4:55 p.m.
President, Professional Institute of the Public Service of Canada
Sorry, but I just want to qualify. I'm not saying that at all. I'm saying that international tax resources are focused on international taxes. There's no crossover. They're not asked to work on local files instead. They just don't have the capacity to get it—
4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
Sorry; I have a short amount of time and I have another question.
4:55 p.m.
President, Professional Institute of the Public Service of Canada
Yes, understood.
4:55 p.m.
Liberal
The Chair Liberal Wayne Easter
Tamara, you'll get the time. We'll let Ms. Daviau finish her response and then we'll go back to you.
4:55 p.m.
President, Professional Institute of the Public Service of Canada
No, that's quite all right. I think I've said what needs to be said.
4:55 p.m.
Conservative
Tamara Jansen Conservative Cloverdale—Langley City, BC
I'll go back to Mr. Cohen.
Wouldn't the problem with tax avoidance be somewhat improved if we finally committed to cleaning up the cumbersome tax code, which is made worse year after year with boutique tax cuts and loopholes?
I know this year's budget was full of all sorts of technicalities that the officials took endless hours to explain to us over the last few days. I saw Mr. Easter there, and Mr. Fraser. I can't even imagine the amount of work tax accountants spend every year just to get up to speed on all the changes.
Wouldn't the KISS principle be a good place to start with our tax code?
5 p.m.
Executive Director, Transparency International Canada
Thank you for the question.
I wouldn't be able to answer that from a TI Canada perspective. I'm not an expert in the tax codes. As an individual, I'd be happy with a simple tax code—the fewer loopholes, the easier. Making that distinction between tax avoidance through legal means and tax evasion and not declaring anything, period, would be my only answer to that.
5 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay, we are going to have to end it there. We have recommended a comprehensive review of the taxation system from this committee, I believe, twice over the last six years.
We turn to Ms. Dzerowicz, followed by Ed Fast.
5 p.m.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thanks so much, Mr. Chair.
First, thanks to everyone for their excellent testimony and this important conversation.
Ms. Daviau, my first question is to you.
You started off by saying that you represent all the workers who work for the CRA, and I know that you work very hard. You were talking about how they have a hard time. They're noticing people taking advantage of loopholes and exemptions and tax credits.
Is there some sort of a process whereby there is actually some feedback that comes from employees through to senior leaders so that it gets to government decision-makers? Sometimes there are inadvertent things that happen, and you want to make those corrections. Are those things in place right now, to your satisfaction and to the sufficiency that's needed so that we can maybe make some of those corrections sooner rather than later?