Finance Committee on June 10th, 2021

[Trevor McGowan]

Kevin or Stephanie, do you have anything on pillar two?

Kevin.

[The Chair, Liberal, Wayne Easter]

There you go.

Mr. Shoom.

[Kevin Shoom, Senior Director, Business Income Tax Division, Tax Policy Branch, Department of Finance]

Thank you for the question.

The work at the OECD and G20, the inclusive framework towards a global minimum tax regime for corporations, is very important in the context of some of the matters that have been raised at this committee today.

One of the key challenges in taxing multinational corporations appropriately is finding the right balance between ensuring that they pay their fair share and not unduly impeding their ability to compete with multinationals based in other countries. That latter consideration makes it difficult to tax at a higher rate or to have a more thorough approach to taxing their income earned abroad, because that could simply result in their not being able to effectively compete with multinationals that are taxed less severely by their home countries.

Trying to move individually on this type of situation is a challenge. The work that's going on at the G20 and the OECD inclusive framework are therefore trying to get agreement amongst a wide number of countries to set a minimum tax rate, which would then allow countries to ensure fairer taxation of their multinationals without having to worry about the harmful effects on the competitiveness of the multinationals based in their country.

The step forward at the G7 finance ministers' meeting was to get agreement amongst the seven countries to put forward a common position of a minimum rate of at least 15% and to have that calculated on a country-by-country basis, which helps to set the stage going forward to the broader G20 finance ministers' meeting in mid-year and the meeting of the OECD's inclusive framework, which includes 139 countries and which will be taking place at the end of this month, to try to promote agreement on the parameters of how that minimum tax could take shape and how it could move forward.

If this does end up working out, it will be a landmark achievement, because it's a way of addressing a lot of the problems many countries have been struggling to address on their own.

[The Chair, Liberal, Wayne Easter]

You can ask a quick supplementary question if you want to, Sean.

[Sean Fraser, Liberal, Central Nova, NS]

This may have been asked, given the stakeholders some of us have probably met with before. I'm just curious. I heard previously from union representatives for public employees who work in this space, who indicated that the lack of human resources in the regional offices at CRA is a barrier to enforcement. Do you agree with that point of view, and what do you think could be done to actually beef up CRA levels on the ground to help combat tax evasion?

[Ted Gallivan]

The CRA continues to enjoy significant investment, so lack of funding is not a preoccupation. We've recently received additional funding for legal support from colleagues at the Department of Justice. I mentioned earlier the 140 additional lawyers, so that's certainly important. As well, as my colleague Alexandra mentioned, training and making sure we have the right training are important.

It's a competitive market our there, but I don't think lack of funding has been a barrier at all. We do have challenges training. As I said, I think we have challenges in terms of the legal resources at our disposal, but not in terms of the number of auditors.

[The Chair, Liberal, Wayne Easter]

Okay. I'll go to Mr. Ste-Marie for one question, Mr. Julian for one and Tamara for one.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Mr. Gallivan, on behalf of the Canada Revenue Agency, do you have a message to reassure the thousands of small investors who were defrauded in the case involving Mr. Weinberg and executives of Norshield and Mount Real?

How are your investigations into the sword companies and their possible links to KPMG progressing? Are you working with the Royal Canadian Mounted Police (RCMP) on this matter?

[Ted Gallivan]

My message is that we have joined the team already working on this file. We are trying to gather the best information available. As we gather the facts to the extent possible, we will move forward and determine the consequences based on those facts.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Mr. Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I will ask you to answer the same question in English.

With regard to all of these people who have been defrauded of their retirement savings in these various scandals linked to KPMG, what is your message to those people who have lost their retirement savings?

I'll also ask if you can tell us the sum total of those funds that have been collected, and those charges laid internationally, with all of the overseas tax havens that Canada has agreements with.

[The Chair, Liberal, Wayne Easter]

That's a complicated question, Mr. Gallivan, but go ahead.

[Ted Gallivan]

I'll repeat the answer quickly in English that I provided previously in French, which is that the CRA did become aware of the situation and we are pursuing additional facts. To the extent that we can get facts and data, we will apply whatever consequences we can legislatively. I think the investors should know that the CRA is playing its role in relation to any of the statutes that we administer.

The second question seemed to be the on total charges related to offshore tax evasion levied by us and partners. Could I suggest an OPQ or another written question, so that I make sure I can address it? I am not sure if this is related to the matter at hand or all forms of tax evasion. I just want to be clear on the question.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

It's all forms.

[Ted Gallivan]

If you want to know globally what all tax authorities have done, I'll have to get back to you with a written answer.

[The Chair, Liberal, Wayne Easter]

Okay, you'll have to get back to us on that one.

Tamara, you have the last question. You said it was a supplementary.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Actually, Mr. Lawrence is going to ask the last question.

Thanks.

[The Chair, Liberal, Wayne Easter]

Go ahead, Philip.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair.

What an honour to end the finance committee.

Mr. Gallivan, of course, we're going to want to get those folks who are evading taxes through offshore tax shelters, and we've talked about that a lot, but there are going to have to be some greater resources, I think, to make that happen.

I have a theory I want you to hear. For the rest of middle-class Canadians, who sometimes pay, because of this government, effective rates of 40%, 60% and even 70%, wouldn't it be great if the government simply lowered rates? You wouldn't have to do so much enforcement and detection, and you wouldn't have to harass small business owners as much. Wouldn't lowering rates on middle-class Canadians reduce the amount of tax avoidance?

[Ted Gallivan]

Again, I think I'm going to choose to go after some of the premises in the question. I think it's true that we've had some overzealous auditors who have asked too many questions of small business, and I talked about our interest in shifting the culture of towards empathy and getting away from that.

My role is to administer the laws as written and as enacted by Parliament. Whether that is a 53% marginal rate or a different rate, we're going to continue to apply the same strategies and techniques.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you.

I have the simplest of questions, Mr. Gallivan.

One of the biggest complaints I have received recently has come mainly from accountants. They are are complaining that the outside drop-off box—now, this is really simple—at the CRA in Charlottetown had been shut during the beginning of COVID, but it hasn't been replaced.

As an accountant told me, there is no reason why somebody in that building can't go out and open up that box and get the returns, rather than having to send them to Winnipeg, for labour deductions or whatever it might be.

That's a fairly simple one. It's just common sense.

[Ted Gallivan]

As a former interim director of the Summerside tax centre, sir, I will find out. I would presume that there is a good reason why that hasn't been restored, but that question will be in the next email I send today.

[The Chair, Liberal, Wayne Easter]

Thank you. It's at the Charlottetown office. They may have it outside at the one in Summerside—I don't know—but the Charlottetown office is where I've been getting the complaints from anyway.

We do have a bit of committee business, but we'll release our witnesses.

Thank you very much. We've seen a lot of witnesses from CRA and especially Finance in recent weeks, so we thank you very much for coming to answer our questions. I wish you all the best. Have a good weekend when it comes around.

Now we turn to committee business. You have received the report of the subcommittee on agenda and procedure. I'll just read through it, and if there are any questions on it, somebody can move it.

We met on June 8 and recommended:1. That the committee meet for 2 hours on Thursday, June 10, 2021 and invite the Minister of National Revenue as well as senior officials from the Canada Revenue Agency and from the Department of Finance;

That's already done.

2. That the committee meet for 2 hours on Tuesday, June 15, 2021 and invite specialists and experts in the field related to tax evasion and that the committee meet for 2 hours on Thursday, June 17, 2021 and invite key stakeholders in relation to the tax evasion study;

The clerk has already sent out some invitations on one or both of those, but we're still short witnesses.

3. That the committee meet for 2 hours on Tuesday June 22, 2021 and invite the Minister of Finance and the Deputy Minister of Finance to appear in regards to tax policy commitments made at the G7 Finance Minister’s Meeting, as well as in regards to the monthly reports provided by the Department of Finance and others;

I expect that invitation has gone out.

4. That the Chair schedule a subcommittee meeting between June 17th and June 22nd, 2021;

We're working on that and we're not meeting with much success yet, but we'll have to try to find one somehow then or shortly after.

5. That, in relation to the committee's pre-budget consultations in advance of the 2022 budget: (a) the committee invite Canadians to share their recommendations in briefs of no longer than 2000 words, submitted through the committee's website, no later than Friday, August 6, 2020, at 11:59 p.m. EST; (b) this year's theme be—

We hadn't decided on one. In fact, we had quite a discussion, and I think Mr. Kelly mentioned maybe it would be left as “pre-budget consultations for 2022”.

(c) only one submission per individual or organization be accepted; (d) a succinct list of recommendations be included at the beginning of the written submissions; (e) all those who submit a written submission will be considered as having made a request to appear before the committee; (f) the clerk be allowed to publish submitted briefs, once they are translated in both official languages, on the Digital Binder Site of the committee; and (g) a news release be prepared by the analysts and the clerk, in consultation with the Chair, and be published on the committee's website and on social media to launch the process.

Does somebody want to move that and we can discuss it?

That's moved by Mr. Fast.

Is there any discussion?

[Annie Koutrakis, Liberal, Vimy, QC]

Mr. Chair, on a point of order, I think we need to correct item number 5, because it says, “August 6, 2020”, and it should say, “2021”.