Finance Committee on Nov. 3rd, 2025

[The Chair, Liberal, Karina Gould]

Good morning. Happy Monday. I call this meeting to order.

Welcome to meeting number 11 of the House of Commons Standing Committee on Finance.

Today's meeting is taking place in a hybrid format.

Before we begin, I would ask all in-person participants to read the guidelines written on the updated cards on the table. These measures are in place to help prevent audio and feedback incidents and to protect the health and safety of all participants, including the interpreters. You will also notice a QR code on the card, which links to a short awareness video.

Pursuant to Standing Order 108(2) and the motion adopted on Monday, September 22, 2025, the committee shall resume its study of the use of offshore tax havens.

I would like to welcome our first two witnesses.

We have Patrick Marley, a partner at Osler, Hoskin and Harcourt. From the Canadian Labour Congress, we have Dr. D.T. Cochrane, who is a senior economist.

You will each have five minutes for your opening remarks, after which we will open the floor to questions.

Dr. Cochrane, we'll begin with you. Thank you.

[D.T. Cochrane, Senior Economist, Canadian Labour Congress]

Good morning.

Thank you for inviting the Canadian Labour Congress to comment on the serious problem of offshore tax havens. My name is D.T. Cochrane. I am a senior economist at the Canadian Labour Congress. I have a master's degree in economics and I earned a Ph.D. that examined corporate strategies for increased returns, including such financial practices as tax avoidance.

The CLC represents affiliated unions with over three million members in sectors across the economy. These workers tell us how worried they are about the state of the economy. They worry for their jobs. They worry about the cost of living. They worry for their children's futures. There are many sources for these worries; however, the blame falls largely upon decades of bad economic policies, including those that facilitated the explosive growth in tax haven use by the ultra-wealthy and biggest corporations.

Before joining the CLC, I worked for Canadians for Tax Fairness, or C4TF, which has been sounding the alarm about tax havens for well over a decade. The problem gained renewed attention during the recent federal election because of now Prime Minister Mark Carney's previous employment with Brookfield Asset Management. In 2023, while with C4TF, I wrote a report that identified Brookfield as Canada's “runaway leader in identified tax haven subsidiaries”. When Mr. Carney was asked about Brookfield's use of tax havens, he dismissed legitimate concerns by saying they “abide by the rules”.

However, that is the problem. Why do the rules let this happen? These rules were created under the ideological claim that lower corporate taxes produce more investment, increase productivity growth, create better jobs and improve well-being.

We got lower corporate taxes. Did we get those other things? No.

Instead of increased investment, corporations funnelled more money through tax havens and distributed more profits to shareholders. Tax haven use deprives governments of revenue with no demonstrable economic benefit. This undermines the government's ability to operate effectively and efficiently. It also places more of the tax bill on working families. Corporations like Brookfield depend on such government services as a secure financial system, contract enforcement and support for a healthy and educated workforce, but they do not contribute their fair share to sustain them.

This is relevant on the eve of a federal budget that the PM says will slash government spending to reduce the deficit. Setting aside overblown hysteria about the deficit, the Carney government is choosing to use cuts instead of raising revenue. This reflects the same thinking that justified tax havens and got us into our current economic predicament. Worse income and wealthy inequality is perhaps the most consequential result of that thinking. The increased use of offshore tax havens is closely linked to these problems.

Cracking down on tax havens would help reduce inequality and bring more revenue for governments. There are many facets to this problem, including money laundering and corporate profit-shifting, but with my remaining time, I want to focus on transparency.

A key challenge in tackling illegitimate tax haven use is their opacity and secrecy. That's why much of our knowledge comes from such leaks as the paradise papers. There are many transparency measures that would help, including the public beneficial ownership registry that the previous government made laudable progress on. I will emphasize the need for public country-by-country reporting, or PCBCR.

PCBCR discloses financial metrics, such as revenue, profits and taxes, paid by the biggest transnational corporations for each country where they operate. The information to be disclosed is already collected by the Canada Revenue Agency. Such disclosure would reveal where these corporations claim their profits and pay their taxes—or don't. Although we know that corporations like Brookfield have a large legal presence in such tax havens as Bermuda and Delaware, we don't know how much profit they are claiming there to avoid taxes.

Australia recently implemented PCBCR. It should be a no-brainer for Canada to follow suit. After decades of failed economic policies that have made people angry and worried, it is time to chart a new course toward greater fairness. Increased transparency around tax havens is a small step in that direction.

Thank you.

[The Chair, Liberal, Karina Gould]

Thank you very much, Dr. Cochrane.

Mr. Marley, you have five minutes.

[Patrick Marley, Partner, Osler, Hoskin and Harcourt LLP, As an Individual]

Thank you for inviting me to speak here today.

I'm Patrick Marley. I'm a tax partner with Osler, Hoskin and Harcourt in Toronto and former co-chair of the tax group at Osler. I've been there for the past 27 years. Before working at Osler, I worked at the Department of Finance drafting tax laws in the international area.

I want to begin by commenting on some of the remarks that were made last week when the government officials were here. I think it's important to first understand and come to a common understanding of what we are looking at with the use of offshore companies and the distinction between the use and misuse of offshore companies.

There was some discussion last week about the difference between tax evasion and tax avoidance, and I think that's a very important distinction. Tax evasion is deliberately not paying the taxes that you owe. That's obviously a crime, and it's something that Canada and the CRA should absolutely stop. Tax avoidance is very different. That's lawfully abiding by the tax rules and not paying the maximum amount that you possibly could otherwise pay. I know the government officials mentioned that there should not be a pejorative inference taken from tax avoidance, but just to put it into perspective, anyone who contributes to an RRSP or a government pension is engaged in tax avoidance. They're not paying the maximum amount of tax they could have paid. They're abiding within the rules and claiming the deductions or entitlements that they're allowed.

There was also discussion about the tax gap, and I think it's important to focus on what the tax gap is. If it's a measure of tax evasion, then that's very clear—it's a measure of how much tax people are intentionally not paying, whether it's through the use of offshore companies or otherwise. I think the CRA should absolutely do what they can to stop that and to decrease the tax gap.

Keep in mind that if somebody's engaged in criminal tax evasion, any kind of public disclosure or new disclosure rules apply to everyone, whether they're law-abiding taxpayers or otherwise. If somebody's going to break the law, they're not going to follow some laws and not others, so it's not likely to help prevent tax evasion to make everybody comply with more reporting.

Also, if the tax gap is measured based on the amount of taxes that could be owing, given the uncertainty of whether taxes are owed or not, that's a very different aspect because the tax laws are very complex. In many cases, thinking people can disagree on whether taxes are owing. That's why we have a CRA appeals branch and the courts, because there might be a legitimate difference of opinion in terms of how taxes are interpreted. To me, that's not the tax gap, but that's an important distinction. To combat that, I think the best way forward is to simplify the tax rules. You'll get rid of some of the complexity, make it more straightforward, increase the administrative guidance and rulings processes and otherwise try to avoid that.

The last aspect that I think it's important we don't lose sight of is taxes that are assessed unfairly and inappropriately by the CRA. Unfortunately, sometimes we do have aggressive CRA auditors who assess taxes that were never owing to begin with. In many cases, those audits are overturned by CRA appeals and never make it to the courts, but not until after, in some cases, years of fighting with the CRA to try to get them to agree that those taxes should never have been assessed. Again, I think to combat that, it's perhaps better to disclose situations where certain auditors have their tax audits—the amounts assessed—overturned by CRA appeals or the courts, or by better training to CRA officers along the way.

Again, these are very different approaches, depending on how you're measuring the tax gap and how you go about it.

The last thing I want to mention is this distinction between the use of offshore companies versus the misuse of them. We operate in a global economy. Many large multinational companies in Canada have operations not just in Canada but around the world. That necessarily involves investments in offshore companies. There might be joint ventures or different investor classes investing in a particular investment. In some cases, they might want to use a partnership that is fiscally transparent, which allows each investor to be taxed according to its own attributes. In some cases, you might have investors from different countries, which necessarily involves investing through, perhaps, a third country to accommodate those.

Very quickly, I would mention that, with the advent of pillar two and the Global Minimum Tax Act, large Canadian multinationals will pay at least 15% in every jurisdiction in which they operate.

Thank you.

[The Chair, Liberal, Karina Gould]

Thank you to both of our witnesses for their opening remarks.

We're going to start with Ms. Cobena from the Conservatives for six minutes.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Thank you, Madam Chair.

My question is for Mr. Cochrane.

You mentioned in your opening remarks how there is aggressive corporate tax avoidance. One of the companies that obviously has been in the spotlight is Brookfield, which is particularly concerning because Prime Minister Carney was chair of Brookfield and continues to have interests in Brookfield today.

Can you talk a little bit more about how the burden of taxes shifts from corporations when they engage in aggressive tax avoidance to workers and consumers? Can you explain how the current loopholes in Canada's own tax laws enable that shift?

[D.T. Cochrane]

The complexity of our tax system lends itself to the creation of impressively creative schemes to avoid paying taxes. They make use of the complications in the rules in ways that were never really intended by policy-makers.

This is where the distinction between tax evasion and tax avoidance starts to get a little bit blurry. I would say there's a gradient. There are corporations using a tax avoidance mechanism exactly as intended—for example, research and development tax credits—and then there is a gradient all the way towards evasion where there is a use of our tax rules that abides by the letter of the law but violates the spirit of the law.

I would suggest that Brookfield has been a master of making use of our tax system in ways that range from perfectly legitimate all the way to seriously questionable. I'm not accusing it of having broken any laws whatsoever. I want to call attention to why the laws exist as they do and to the need to bring more light to bear on how taxes are being avoided. A lot of it is of dubious economic benefit to Canada and to Canadians.

Brookfield has really been a master class in this tax avoidance when you look at what its effective tax rate is versus what you would expect it to pay, based on the combined provincial and federal income tax rates.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Of course, it's hard to have an exact number in terms of what that lost revenue is, but one of the independent studies mentioned that it was approximately $15 billion. Can you speak to, because we have that loss of revenue, the burden that falls on average Canadians, the consumers and workers? We have that hole now and, of course, still have the expense on the government side.

[D.T. Cochrane]

Yes, if corporations are managing to reduce their tax bills through less than legitimate means, then that difference has to be made up somewhere. It can be made up either by increasing the taxes on other taxpayers, primarily workers, or by making cuts to services that Canadians depend on.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Is it true that tax audits and prosecutions of corporate offenders are rare, particularly compared to those targeting individuals in the small businesses in Canada?

[D.T. Cochrane]

The area of this that I know best compares Canada to some of our of our peers around the consequences from the big leaks that we had, like the paradise papers, the Panama papers. To my knowledge, not a single Canadian ended up being prosecuted, based on the information that came out from those leaks, whereas many of our peers ended up prosecuting numerous people.

Whether this speaks to problems with our actual tax law that meant people weren't breaking laws that seem egregious or if this is a problem on the prosecution side of things, I do know that there is a lot of incentive for those whom the CRA is trying to prosecute to really dig in their heels and fight with everything they have. This is because there's a good chance that they will end up getting away with the taxes that they didn't pay, and the cost associated with fighting is going to be less than if they lost the case and had to pay the taxes.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

What are the loopholes in the Income Tax Act that currently allow entities like Brookfield to operate in subsidiaries abroad without full domestic taxation?

[D.T. Cochrane]

There's a big concern when corporations are operating transnationally about what's called double taxation—that they'll get taxed twice on the same income in different entities. We have tax agreements with many countries as a means of trying to prevent double taxation.

What will end up happening is you'll get double non-taxation. Tax havens are a particular scourge on this front. Income that gets claimed within a tax haven could end up not being taxed at all, anywhere. The actual details of how these all get used and the particular tax rules in different countries are very complicated.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Cochrane. That's time.

Thank you, Ms. Cobena.

We'll now go to the Liberal Party. Mr. Leitão, you have the floor for six minutes.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

Thank you very much, Madam Chair.

Gentlemen, thank you for coming to take part in these very important discussions.

My first question is for you, Mr. Cochrane.

You mentioned that one of the big problems was really the lack of transparency, or the opacity. That's indeed an extremely significant obstacle. In that context, you also mentioned the measures that governments have taken regarding the ultimate beneficiaries who benefit the most from these tax havens.

It's a complex system. However, some measures have already started to be taken. Where would you rank international co-operation and collaboration on the scale of important things to do?

[D.T. Cochrane]

At the current moment, I would rank this right at the very top.

You are correct that measures have been taken to deal with international tax avoidance and illegitimate uses of our tax rules. I would say that the Department of Finance and the CRA are extremely good at identifying when schemes have been constructed for illegitimate purposes and at eliminating those schemes.

A couple of budgets ago there was the elimination of what is called hybrid mismatch, which is a complicated mechanism for identifying income as coming from interest on one hand and equity on the other hand as a means of reducing the taxes owed. Those departments are really good at that kind of thing, but it's always going to be a little bit like whack-a-mole. They are always going to behind the creative process of making these schemes.

Something like PCBCR allows more people to start digging into the information and identify where at least questionable claims of profit and tax are being made.

We know, for example, that Brookfield has dozens of subsidiaries in Bermuda. Bermuda, if I remember correctly, has an $8-billion GDP. How much revenue or profit is Brookfield claiming in Bermuda? That would be a massive red flag if they're claiming large amounts of revenue there, given the size of Bermuda's economy.

PCBCR really is sunlight as the best disinfectant. It would allow academics and researchers outside of the tax authorities to engage in the kind of research that we need to deal with this whack-a-mole problem. There will always be incentive to create these schemes. We need more methods of confronting them.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

Thank you very much.

Mr. Marley, you made a good point, of course, on the differences between tax evasion and tax avoidance. You mentioned, for example, RRSPs.

A lot of Canadians have RRSPs. In those RRSPs, a lot of Canadians have mutual funds. Some of those mutual funds invest in offshore markets...or international markets. I would rather use that term. They are international stock markets.

In that context could, for example, a Canadian having a mutual fund that invests in the Japanese market to some extent be considered tax avoidance?

[Patrick Marley]

I don't think that's tax avoidance at all, but I'll just give a quick example to tie in with what you were just saying.

If you have a mutual fund that's investing in a Japanese fund or Japanese markets, in many cases you'll have investors not just coming from Canada; you'll have investors coming from all different jurisdictions. We're a very small player in the global scheme. U.S. private equity, for example, is a very important capital source around the world. U.S. private equity often invests through Cayman into the partnerships. Partnerships are fiscally transparent so they're not taxed at all. It doesn't matter if they're in the Cayman Islands. You could be in Canada. Canadian partnerships are not taxed. They're also fiscally transparent. The reason partnerships, particularly from mutual funds or RRSP investments are very important is that you might have a tax-exempt pension fund in Canada, a charity from the United States and a taxable investor from Japan all investing together. They're not going to want to invest in a Canadian company if the underlying investments are in Japan. They're going to want to invest somewhere where there's tax neutrality, such as the Cayman Islands.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

I think that's quite clear. Thank you very much.

I will ask Mr. Cochrane the same question.

[The Chair, Liberal, Karina Gould]

You have about 10 seconds left, Mr. Leitão.

[Carlos Leitão, Liberal, Marc-Aurèle-Fortin, QC]

Is international co-operation good?

[Patrick Marley]

International co-operation is good. With respect, I don't think we need public disclosure. I think the tax authorities are the ones that really need that information.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Marley.

Thank you, Mr. Leitão.

I will now give the floor to Mr. Lemire, from the Bloc Québecois, for six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair. Thank you for having me.

Thank you to both witnesses for being here to discuss this important topic.

Mr. Marley, I'll start with you.

The Prime Minister has said that the use of tax havens isn't a form of tax avoidance, because the taxes end up being paid in Canada.

Can that claim be considered accurate from a tax and ethics standpoint, or is it a questionable justification for a mechanism that circumvents the spirit of tax laws?

[Patrick Marley]

With apologies, I will respond in English. My French is not very good.

In short, there is nothing wrong with investing in tax havens, or companies investing in tax havens, so I agree with that remark. We must remember that corporations are not people. Taxes paid by corporations are ultimately paid by the shareholders, the investors, or by the employees or other stakeholders.

I think having corporations overpay for their taxes particularly in a multinational environment puts them at a competitive disadvantage and makes it more difficult for Canadian multinationals to compete internationally with others. From that perspective, I think it's important that between the source country where income is ultimately earned and the resident's country, and let's say that's Canada, we don't have additional layers of tax along the way. We need neutrality to allow the income to flow up to the investors and the shareholders. That is what funds not just our pensioners, but also our shareholders and our capital markets.