Finance Committee on June 22nd, 2021

[Ted Gallivan]

It has identified some taxpayers who were flying under the radar. That's part of why we have more than a thousand audits.

In fact, our challenge isn't identifying taxpayers we should audit but getting the audits done. That's why budget 2021 gave us new resources for litigation. We have almost 100% of these taxpayers who litigate during the audit to obstruct our efforts to get the information we need, which is why they take longer and why we have to give them more time.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. Chair, my purpose for raising those programs—and there are others—is that both of those programs were implemented by Stephen Harper.

Minister, I just want to say to you that you came to our meeting and started off by attacking Conservatives. Then you told Mr. Ste-Marie to go fly a kite and go talk to the RCMP.

Minister, when are you going to take personal responsibility for the file that you've had since 2015?

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

Mr. Chair, I can tell you that tax evasion is particularly important to me, not just to me, but to our government as well. In fact, it is because it is so important to us that we have invested so much money in this program.

Mr. Chair, I urge the Conservatives to vote for the budget that has been introduced, to give us more tools that will have the effect of tightening the rules and combatting tax evasion.

[The Chair, Liberal, Wayne Easter]

Okay.

The last question goes to you, Ms. Koutrakis.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

Thank you for being here this afternoon to answer our questions, Minister.

Minister, we have talked a lot about the past and how the former Conservative government made major cuts in the fight against tax evasion, and about the present, that is, the efforts our government is making to rebuild what the Conservatives dismantled.

I wonder whether you can take a moment to talk about the future of our fight against tax evasion.

What is our government's next priority?

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

Mr. Chair, I thank my colleague very much for her question.

What I am going to say is also found in my mandate letter. The CRA has not only developed a plan that promotes the collection of essential data with international partners, but it is also working in close collaboration with the other Canadian government departments. We work with the Departments of Finance, Justice and Public Safety.

What is set out in the budget is intended precisely to eliminate even more loopholes that are used to avoid paying taxes in Canada. That is why it is so important to us, at the CRA, for all our colleagues around the table to vote for the budget.

We want to improve the CRA's capacity to fight tax evasion and modernize the general anti-avoidance rules in Canada. That is a priority. We are moving forward and we are going in the right direction, but we need everyone's collaboration. Fighting tax evasion has to be a whole-of-government priority.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Minister.

My next question is for Mr. Gallivan.

Speaking on budget 2021, our government announced new policy measures such as new mandatory disclosure rules that will build on previous investments to enhance our fight against tax evasion. What are some other policy changes that you see as necessary in the government's fight against tax evasion?

[Ted Gallivan]

I certainly think that the powers of oral interview that allow our auditors to interview officials of businesses to get their position on the record is an important change announced in the budget. There were 15 BEPS action items. Action two on interest deductibility and action four on hybrid mismatches are areas that budget 2021 is coming in on to tighten the rules.

Also, the general anti-avoidance rule, which is a form of anti-avoidance super-rule that sits on top of the rest of the Income Tax Act, is also under review for tightening. That's an important tool in our tool kit. I would say all of those items announced in the budget are pretty important. In addition to the CRA's use of it, I think just its presence in the budget sends a signal to tax practitioners and businesses that it's time to pay taxes.

[The Chair, Liberal, Wayne Easter]

We will have to end it there. We went considerably over the minister's time. We, as I told a couple of committee members, don't have officials for the next hour, but there are a couple of things we have to deal with.

Madam Minister and Mr. Gallivan, thank you for your appearance today. If we look at the record, there's a lot of information that we can glean from it. All the best to you both this summer. On behalf of the committee, thank you very much. We'll release you.

[Ted Gallivan]

Thank you, Mr. Chair. I wish the same to you.

[The Chair, Liberal, Wayne Easter]

Thanks.

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

Point of order, Mr. Chair.

[Diane Lebouthillier, Liberal, Gaspésie—Les-Îles-de-la-Madeleine, QC]

Thank you very much, Mr. Easter. I again wish you—

[The Chair, Liberal, Wayne Easter]

Yes, Mr. Ste-Marie, we'll go to the point of order.

I was just going to say, if I could, Mr. Ste-Marie, before you do that, that Mr. Fast had asked for the English translation of your motion at the last meeting. I believe that has been sent out to committee members. I think it was the wrong one first, but I believe it's there now. I just want to make sure we have consent that it is the motion. I don't think we need to move it again.

Are we okay with that? Is there any objection? All right, we're okay with that.

We will go now to your point of order, Mr. Ste-Marie, and then Mr. Julian has a motion.

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

Mr. Chair, I think the minister wanted to congratulate you, but you didn't hear her because of the interpretation. I don't know whether she wants to do it before my point of order.

I think she has left.

[The Chair, Liberal, Wayne Easter]

I think she's gone.

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

She wanted to congratulate you before leaving the meeting.

I have a point of order regarding Mr. Gallivan's interpretation of the minister's power of inquiry under subsection 231.4(1).

Obviously, I do not entirely agree with his interpretation and I would point out that when Mr. Lareau, one of the leading Canadian tax law specialists, appeared, he asked us to ask the minister to initiate a public inquiry under that subsection.

I would like to read the paragraph, which is only a few lines long, but speaks volumes. I would like to point out that the power of inquiry given by subsection 231.4(1) has been confirmed by a decision of the Supreme Court of Canada. It went that high. So that everyone understands, I am going to read it.

231.4 (1) The Minister may, for any purpose related to the administration or enforcement of this Act, authorize any person, whether or not the person is an officer of the Canada Revenue Agency, to make such inquiry as the person may deem necessary with reference to anything relating to the administration or enforcement of this Act.

The minister absolutely has the power to initiate an inquiry under that subsection. That is what we were told by Mr. Lareau, the expert who testified at the committee, and it has been confirmed by the Supreme Court of Canada.

I would just like that to be quite clear. That concludes my point of order.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

I think, really, we're not so much into a point of order as a point of a difference of opinion. Do we want a written response from CRA on that matter?

Okay, I will ask CRA. You put that into evidence, Mr. Ste-Marie. We have what Mr. Gallivan said. Let's get a response from committee members on how they look at both and see where that leads us. That is a difference of opinion.

Mr. Julian, you had a motion, you mentioned to me earlier, that you wanted to put. I expect that the bells are likely going to ring at any time, but in any event let's start into it.

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

Thanks very much, Mr. Chair.

I think we probably have about 45 minutes. I believe that Mr. Ste-Marie wants to come back to an issue as well.

I've already circulated the motion and I'll read it for the record and then add an amendment just to facilitate things. This is following discussions with Mr. Sorbara. I move:

That the Committee request that the government initiate a public inquiry under the Income Tax Act—

I would add “or the Inquiries Act”.

—to investigate tax planning by KPMG, or any of its subsidiaries, in the Isle of Man, the possible involvement of the sword companies Shashqua, Katar, Sceax, Spatha and Parrhesia corporations, and to investigate tax fraud in the Cinar, Norshield and Mount Real cases and any possible links with the KPMG Isle of Man tax planning and/or Isle of Man's sword companies, and that this be reported to the House.

I'm adding “or the Inquiries Act” because that gives the government the scope to use either tool, and since there is some dispute around the use of the Income Tax Act, my interpretation—and I would certainly agree with Mr. Ste-Marie and Mr. Lareau on that—is that it gives the government a broader scope to use the tool that is most appropriate.

The most important thing here is that we know from the testimony we had from Janet Watson, from the really important journalism we've seen both with Enquête on Radio-Canada and also from The Fifth Estate on CBC that thousands of Canadians were defrauded. That money was taken overseas. We have a responsibility and we've undertaken to get to the bottom of it as much as we can, but to date, we have asked KPMG many questions and have received often evasive or incorrect responses or no responses at all.

Therefore, I believe that given what we know and that we all share an interest in getting to the bottom of this and we all share an interest in seeking justice for the victims of these colossal frauds—half a billion dollars, and people losing their life's savings. You can only imagine somebody who saved up, like Janet Watson did, $68,000 of her life savings and lost it all due to this fraud.

I believe we have a responsibility to pass this motion. Ultimately, it is a request, but it does seek justice for the victims, and I believe that's what every member of this committee wants to see as well.

[The Chair, Liberal, Wayne Easter]

Okay. It's on the floor. Do we have an agreement on the “or the Inquiries Act”? Are we okay with that or do we need an official amendment? I don't hear any objections.

Okay. It's open for debate. Who's up? Don't everybody speak at once.

Did I see your hand, Julie? Nobody's up. Julie's just waving her hands around.

All right. Are we seeing it as agreed to?

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

That would be with that modification, Mr. Chair, “under the Income Tax Act or the Inquiries Act”.

[The Chair, Liberal, Wayne Easter]

Yes, and the Inquiries Act is the right name? It's not the public inquiries act? Do we know the specific name? I kind of thought it was the public inquiries act. Do any of the analysts know what the proper name is? We want the proper name.

I see Brett looking. We'll just wait a minute. I think all the analysts are working on it. We want the specific name of the act so that we're not wrong.

[Ed Fast, Conservative, Abbotsford, BC]

I believe it's the Inquiries Act.

[The Chair, Liberal, Wayne Easter]

It is the Inquiries Act? Okay. Then we'll vote.

(Motion agreed to)

All right, that's dealt with. We'll put that to the government.

Did I hear, Gabriel, that you had another point that you wanted to raise?

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

No, Mr. Chair.

Thank you.