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.
5:10 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
I never asked you to discuss specific client situations. I just asked you a very general question about the tax consequences of the OCS program. Now I did want to ask one more.
You've served notice for libel on the CBC for its reporting, but your firm did face legal sanctions in the U.S. from the advice you gave to clients respecting the offshore structures, correct?
5:10 p.m.
Canadian Managing Partner, Tax, KPMG
I'm not familiar with what occurred in the U.S. I'm not connected with that matter whatsoever.
5:10 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
You have no knowledge about that at all—is that what you're telling me?
5:10 p.m.
Canadian Managing Partner, Tax, KPMG
I do have knowledge of it, Mr. Fast, but I don't—
5:10 p.m.
Liberal
The Chair Liberal Wayne Easter
Mr. Fast, if you could, give Ms. Iacovelli time to respond. We have to be fair here.
5:10 p.m.
Liberal
The Chair Liberal Wayne Easter
We try not to get into yes-or-no answers. You know that.
Go ahead, Ms. Iacovelli.
5:10 p.m.
Canadian Managing Partner, Tax, KPMG
I understand that our U.S. member firm did face penalties with respect to that occurrence, and I understand that this had implications for the types of services it was able to provide.
5:10 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Okay. Thank you for that answer.
I know you don't admit to culpability for these frauds, and I understand why you would do that. However, reflecting on what has happened, is there something you could have done to prevent these frauds from occurring, as an accounting firm and as a consultant to your clients?
5:10 p.m.
Canadian Managing Partner, Tax, KPMG
With respect, again, we have no connection with Cinar and with the “sword” companies, whether directly or indirectly. I'm a tax adviser; I'm not a specialist with respect to fraud. I couldn't even begin to explain how to prevent something like this.
5:10 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
All right.
You did say that you had done an extensive review. KPMG had done an extensive review of steps that could have been taken.
Can you tell us if this extensive review you undertook actually provided you with some information as to what additional protection could have been implemented to protect vulnerable Canadians like Ms. Watson?
5:10 p.m.
Canadian Managing Partner, Tax, KPMG
The extensive review we undertook was to determine which clients sat under the OCS. Back in 2017, the CBC approached us again about the “sword” companies. We spent thousands upon thousands of hours reviewing our files—hard-copy files and electronic files—and conducting forensic reviews within our systems to determine if those clients were our clients. I can very certainly say that they aren't our clients.
With respect to your question on what can be done, I think we've seen a lot of measures put in place for common reporting standards. A lot of global standards have been put in place as well. There's an exchange of information, including the PAC exchange with the U.S.
The most recent budget included a new form of disclosure requirements for transactions. From a corporate perspective, there are also disclosures for foreign affiliate reporting. An extensive number of disclosures are required with respect to offshore accounts, both for individuals and for corporations.
5:15 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll have to end it there.
Here is the lineup. Going back to the top of the round, I have Mr. Fragiskatos for about five minutes; Mr. Kelly, if he wants to go to the top of the round; Mr. Fraser; Mr. Ste-Marie; and Mr. Julian. There are about three minutes each for the last four.
Go ahead, Mr. Fragiskatos.
5:15 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thank you, Mr. Chair, and thank you to the witnesses.
Mr. Cohen, I'm interested to hear your perspective, particularly because your organization has an international focus. Can you let us know which democracies really stand out in the efforts put in place to meaningfully address tax evasion? Which ones can Canada look to for making improvements and building upon things we've done in recent years?
5:15 p.m.
Executive Director, Transparency International Canada
Thank you for the question.
As regards overall tax evasion, I wouldn't be an expert in that in terms of the kinds of information exchanges that Ms. Iacovelli pointed to.
In terms of beneficial ownership registries and where the trend has gone, the U.K. was the first country to establish a publicly accessible registry, followed by the European Union setting out anti-money laundering directive 5, so all EU members have to have a publicly accessible registry. Now, some are at different scales of that procedure. As I mentioned in my opening, the U.K. Crown dependencies and overseas territories felt pressure from that or felt co-operation from that and so followed on.
It's not just those countries. As well, in the Open Government Partnership, a number of countries have signed on there to establish registries. Countries such Mexico and Kenya are moving towards registries. The extractive industries transparency initiative, the board of which Canada sits on or chairs and contributes funds to, has required all 54 members that have signed on to disclose beneficial ownership information of companies seeking oil and mineral rights, and they suggest to their members to have a beneficial ownership registry as well. In terms of that tool working towards helping fight tax evasion, it's a growing number of countries, including some of the countries that are listed as the worst tax evaders.
The United States just recently passed the Corporate Transparency Act, which will have a centralized private registry. The number of countries that a tax evader would want to move their funds to, where a crooked politician couldn't just dive into their bank account, is shrinking and shrinking progressively, so it's good that Canada has joined that group.
5:15 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
I very much agree with you. Judging from everything you've just said and based on your initial testimony, it sounds as though there's a certain momentum that has developed within democracies to address the issue. Do you think that's a fair observation?
5:15 p.m.
Executive Director, Transparency International Canada
Yes, I think that's a very fair observation.
5:15 p.m.
Liberal
Peter Fragiskatos Liberal London North Centre, ON
Thank you very much.
Ms. Watson, again, thank you very much. My colleagues have absolutely done the right thing and thanked you for appearing here today. They've been very sincere, and for very good reason. I think it takes a great deal of courage to be an advocate as you have become, and I do want to pay attention to the human side of the equation. Certainly there are policy issues and implications that are at play here, but you've become an advocate. I know there are many other advocates as well, but you've become one of the voices on this issue in Canada.
Regarding those whom you've had a chance to get to know through your advocacy, you did mention some of this in your testimony earlier, but could I ask you to expand on that? Truly it's important for the committee to understand the human side to this. How are they doing, those whom you've met along the way who have been victimized, whom you know and have met?
If you can elaborate on that, it would be helpful.
5:20 p.m.
As an Individual
Thank you.
Well, it has been 16 years since the fraud was uncovered. Most of us have tried to move on with our lives. A number of our victims passed away. Because in our investment you had to have at least $50,000 to invest, most of the investors were people in their fifties and up. We've lost quite a few.
I've heard incredible stories. One was a man who survived Japanese prison camp and was married to a Holocaust survivor, an incredible man. The people I've met along the way have been so kind, so helpful and so grateful for what I do in keeping them informed or having kept them informed.
There was a well-known singer in Quebec who kept his story private for a long time, until we had a meeting. He met a number of the other victims and he realized that these were ordinary people. They were businessmen, doctors, lawyers, dentists and professionals who were victimized the same as he was, so he told his story publicly.
We did everything right. All our financial representatives were registered with the AMF. They were all in these professional associations. Mount Real was listed on the stock exchange. There was nothing to suggest that this company was an enormous Ponzi scheme until it was too late.
5:20 p.m.
Liberal
The Chair Liberal Wayne Easter
Okay, we will have to end it there. I'm sorry.
We'll go to a couple of minutes each from the following: Mr. Kelly, Mr. Fraser, Mr. Ste-Marie, Mr. Julian and Ms. May.
Mr. Kelly, the floor is yours. Do you want it, Pat, or who's taking it?