Finance Committee on Nov. 17th, 2025

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

I do think the key to success is to keep working together.

You said that under the BEPS project, the data has to be reported country by country, but in Canada's case, it is not necessarily made publicly available. Personally, I agree with you and I think it should be.

What do you think would really be the major benefits if this information, which the Canada Revenue Agency now holds, were made publicly available?

[Julien Martin]

First, there is a transparency aspect. We know that transparency is part of the solutions. Second, there is simply being able to study the phenomenon, whether in government departments, in organizations or at universities. We have to understand the phenomenon better, see what firms we are talking about, and see what the amounts in issue are, among other things. Data is collected about all of that. Researchers need to know what profits a multinational is making, country by country, jurisdiction by jurisdiction. They also need to know what its sales there are, how many employees it has there, and how much tax it pays in those places. Based on that, we can say a lot about the tax haven phenomenon and we can quantify it, for one thing.

Australia, for example, is currently enacting legislation to make this data public. The European Union is also doing so. However, they will be making the data public in a slightly different way. So then you have to go into the details to see exactly what the data to be made public is. For one thing, is it about all multinationals or large multinationals, and what is the threshold? In Canada, I think we could really move forward on this fairly easily.

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

Thank you.

How much time do I have, Chair?

[The Chair, Liberal, Karina Gould]

You have one minute.

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

Mr. Meinzer, I have a question that is a little bit out of left field, about something that has always fascinated me, perhaps not in a good way.

Within the European Union, how does the union deal with places like Luxembourg, Ireland and perhaps even the Netherlands? How does the European Union do that?

[Markus Meinzer]

I would say that there is a certain dose of observable hypocrisy within the European Union, in that we cannot treat all member states in the same way. The European Union likes to point fingers and label other countries as tax havens. That is a big issue that we are not happy about, and we are constantly trying to point out the need for more ambitious reforms within the European Union.

However, the country-by-country reporting was a success story. We can show a deterrent effect of country-by-country reporting on multinationals' profit shifting of 28%. We've been making the—

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Meinzer. We're going to have to leave it there.

That concludes the time for this round. Thank you, Mr. Leitão.

Mr. Garon, you have the floor for six minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Madam Chair.

Thanks to all the witnesses for being with us today.

Professor Martin, one of the things you talked about creates a bit of a dilemma. On the one hand, we are often presented with the existing laws that encourage the use of tax havens as tools to make large Canadian corporations more competitive at the international level. On the other hand, Canada is recognized as being a country of monopolies where there is a lot of concentration. You are telling us that in a country like this, where large corporations benefit from tax havens, we are impeding the emergence of small innovative businesses, which are ultimately unable to compete with the big ones.

Which of the two versions should we believe? Should we continue encouraging the use of tax havens, or should we try to shut them down so our small businesses are able to succeed?

[Julien Martin]

That is a good way of looking at things. The paper I mentioned stated that tax havens give firms that avoid tax a competitive advantage over other firms, which distorts competition. Does that distortion operate systematically in favour of the larger firms? In general, yes, but it is not always the case. It may be different in some sectors, but, generally speaking, if we want healthier competition in a country, it is essential that everybody be operating on a level playing field, and not that only certain firms have access to tax avoidance techniques.

A radical solution might be the opposite: allowing everyone to avoid tax. I don't think we want to go in that direction, however. To improve competition, I would reduce the tax avoidance practised by certain actors.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I understand that tax avoidance has a certain cost. For one thing, you need accounting firms and tax lawyers, which are not within the reach of the small business on the corner. In general, you need to have a certain size, is that right?

[Julien Martin]

Exactly. This is mainly about tax avoidance through tax havens, but other ways of avoiding tax exist now. In fact, that is why I do not necessarily want to completely generalize the results. At present, we are looking at tax avoidance through the use of tax havens, which is the preserve of the biggest corporations. However, there are also sectors where medium-sized firms could avoid tax by using completely different techniques.

What we have to remember is that tax avoidance provides a competitive advantage and is therefore bad for competition. It is important to keep that in mind.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I would like to hear your comments on publishing the data. For several reasons, we are not necessarily taking that subject on today. However, it seems that Canada suffers from a lack of transparency. Am I correct to say that if a Canadian corporation avoids tax via France, we can tell, but if a French corporation avoids tax via Canada, there is no way of telling?

[Julien Martin]

From the French data, we are able to see the conduct of all corporations in France, including subsidiaries of Canadian corporations in France. So we can tell whether those corporations are manipulating their transfer prices to shift profits to tax havens.

[Jean-Denis Garon, Bloc, Mirabel, QC]

I just want to be certain I have understood correctly. If I wanted to know about a Canadian corporation's tax morals, I have more chance of getting an answer by looking for the answer at one of its subsidiaries in France where there is data transparency.

[Julien Martin]

Yes, and all the more so right now, because of the country by country report that has been made public in the European Union. Similarly, once the data is published in Australia, we will know more from the Australian data about a Canadian corporation that has a subsidiary in Australia than from Canadian data.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you.

You are going to force me to agree with my colleague Mr. Leitão, that this data should be made public. That idea comes from the Liberal side, so I assume that it will get done quickly and it could be a generational policy. I am kidding.

Since the current Prime Minister took office, he has foregone $90 billion in revenue over five years, which is a huge amount. That included the entire portion represented by the minimum tax on multinationals pillar, the second pillar. The reason cited for dropping it is that the Americans don't want it anymore. As the smaller principal economy partner, we here in Canada are doomed to follow the Americans.

I understand that the approach you are advocating is different. I know you ran out of time for your opening remarks. Can you give more detail as to what you would do with the second pillar, given the Americans' withdrawal?

[Julien Martin]

We have to look for alliances. Yes, if the Americans withdraw, if Canada maintains this position, the risk is that there will be trade reprisals by the Americans. To avoid the reprisals, coalitions have to be built. We have to do the opposite of what we are doing with tariffs: We have to go after European countries. For example, we have to go after the United Kingdom, India and other countries. We have to form coalitions to avoid finding ourselves—

[Jean-Denis Garon, Bloc, Mirabel, QC]

We have 15 seconds' speaking time left.

What would your answer be to a Canadian government that tells you it has eliminated the minimum tax, because it had no choice, but it is going to renegotiate it multilaterally, and someday, it will come back? Do you believe that?

[Julien Martin]

I believe we are capable of doing better, at least collectively. At the global level, we are capable of doing better than what we are doing right now in terms of co-operating to deal with the United States. Will we succeed? I don't know, but we are capable of doing it.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Garon.

We will continue with Ms. Cobena for five minutes, please.

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

My questions are for Monsieur Martin.

For ordinary Canadians, tax rules are of course clear, strict and enforced, and oftentimes audits are done. Multinational corporations with offshore subsidiaries have the option of using offshore tax havens. You spoke about them being complicated structures that are costly to put in place, so naturally they wouldn't be available to ordinary Canadians or even small businesses in the mid-market space in our economy.

On that basis, do you believe that Canada's current tax system treats all taxpayers equally?

[Julien Martin]

The system treats everyone the same. The question we have to ask is whether everyone can use the system the same way, and that is obviously not the case. As you said, corporations are able to pay for accounting services and audit services that enable them to manipulate the law. That is what Professor Loomer said, also. From that perspective, everyone is not equal before the law.

Here again, there are several reasons for this. It may be the way the law is written: that it offers some businesses opportunities and not others. That is beyond my expertise as an economist. You would have to talk to a lawyer about that instead. I would maybe leave it to Professor Loomer to discuss that.

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

You also spoke about tax avoidance being highly concentrated among a few select entities and the impacts of that on our local economy. Can you expand on that?

[Julien Martin]

There are two aspects to that.

The first aspect is that, yes, if you study tax avoidance associated with the use of tax havens, you will find that it is highly concentrated in the hands of a few very large multinational corporations. We are talking about thousands of multinationals, but that number is still low in relation to the large number of corporations in the world.

The second aspect is that once you give those large corporations a competitive advantage, because they have the opportunity to engage in tax avoidance, which means they are paying less in taxes than the others and their costs are lower than the others', you will be heightening those corporations' dominance. Because they are avoiding tax, those big corporations will get even bigger. So you will be increasing economic concentration in your economy. In the study I did with my co‑authors, we show that this is the case in certain sectors in the United States. The citation for the study is in the document I provided to you.

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

Thank you for that.

Yes, of course, it's not just about the lost revenue for Canada, but also about the impact on competition and the distortion of that competition that you mentioned, which is why it has been very difficult to see the Prime Minister's abuse of the use of offshore tax havens when he was at Brookfield.

You also talked about the lack of data publication and what that means. What are your thoughts on that?