Industry Committee on June 5th, 2023

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

Thank you.

As regards the fight against tax havens, do we currently have any free trade agreements with a country that one would call a tax haven?

Would Bill C‑42 help provide bargaining tools to renew those trade agreements and ensure that transparency is a necessary criterion in allowing a Canadian corporation to do business with a less cooperative country?

[Mark Schaan]

The object of Bill C‑42 is somewhat different. Trade agreements are normally reached between governments and concern taxes or free trade. Instead, this bill concerns the directors and officers of business corporations.

Directors and officers have a positive duty to name the human individual at the end of the chain. That includes persons outside the country and in foreign countries where there's a lack of transparency. This is really something other than a trade agreement. The directors and officers in Canada have a duty to provide the required beneficial ownership information even if the actual person at the end of the chain is located in Jersey or on a tropical island.

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

In Quebec, corporate ownership falls under the Civil Code of Quebec since it's a matter of provincial jurisdiction. From a legislative standpoint, does that complicate matters for your department when it comes to coordinating and matching the various guidance measures?

[Mark Schaan]

It's not a complication; it's a requirement. In Canada, incorporation is a provincial and territorial matter as well as a federal government matter. It's a shared jurisdiction.

A bill such as the one before us requires that all system stakeholders take the same approach.

You're only as good as your weakest link.

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

What would happen if Bill C‑42 weren't adopted? What would be the economic or fiscal consequences of that?

[Mark Schaan]

I don't have any cost figures, but there would be consequences for Canada's reputation. Our country is involved in a global effort to combat money laundering and terrorism financing. If Canada didn't adopt a registry or step up its efforts to do so, it would be reneging on its commitments, and the consequences of that could be very significant.

There would also be an economic cost because business corporations could still be used to launder money.

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

Thank you, Mr. Schaan.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Go ahead, Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I'm glad to see these amendments. I hate to say “I told you so”, but I'm going to say it, because some of these things are what were voted against the last time. One that I'm looking at right now—and I'm looking at my old notes—is a fight over the fines and penalties again, the $200,000. It was talked about before. We had pushed for a million dollars. The $5,000 fine.... I mean, these could be like the cost of doing business. With fraud and the type of pain and suffering this creates, $200,000 is like a slap on the wrist. That's not a lot of money.

Why wouldn't we tie it to revenue or assets if we want to go with giving small businesses a break? I guess where I differ is where it says up to $5,000 and up to $200,000. Where did these numbers come from? I really am interested in that.

This committee fought before to stop the use of fines and penalties as tax-deductible writeoffs. That was one of the first things I fought for here, because it was the cost of doing business. It hurt not only the consumers out there but also other businesses that were doing the right thing. That's the other part of this argument here—all the other businesses doing the right thing.

Where does the $200,000 come from and where does the $5,000 come from?

[Mark Schaan]

I think that again I'm going to make the important distinction between the fines that are levied against the corporation versus the fines that are actually attributable to the individual directors and officers of the corporation. The $5,000 is consistent with all of the other penalties levelled against the corporation in the act. It's the consistent fine that we level against corporations for misconduct under the act. Again, we feel that the ability to render penalties against the corporation is a limited mechanism by which to actually root out the behaviour because it isn't tied to the individuals.

The $200,000 is an individual liability, so again you can't tie it to revenue, because they're not corporations; they're individuals. When you imagine being a director or an officer of a corporation and potentially being liable for $200,000 of your own money and six months in jail of your own time, it actually takes on quite a meaningful potential incentive to ensure that your corporation is actually on the right side of the law.

[Brian Masse, NDP, Windsor West, ON]

When you look at the malfeasance that's taken place in white-collar crime, I don't think that $200,000 to many people is.... That's now the equivalent salary for professional occupations in general per year.

I'm sorry. I just don't have much faith in western democracies' treating white collar crimes as significant. There have been very few cases of people actually going to jail. If we're going to criminally prosecute somebody, a $5,000 fine.... It's going to cost us significantly more to prosecute. If our threats are solely to just put people in the courts, then we're pushing into the court system, which is under stress now.

I guess I'll leave that for our debate. I appreciate where it comes from. At least we understand now.

Those are my questions, Mr. Chair, because it's going to be kind of a political fight, I guess, to some degree. I appreciate the officials, though, with their information.

[The Chair, Liberal, Joël Lightbound]

I think we understand that it's a political fight you have been waging for a long time, Mr. Masse. Mr. Longfield was commenting that you have not changed that much over the years. Consistency is good in politics.

That concludes our round of questions. However, we have a bit more time, so if anyone has more questions, I will open the floor. Otherwise, we will leave it at that.

Before I let you guys go....

Okay, I see Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I have a quick question for the officials.

To me, the implementation of this measure is going to stem largely from how simple it is for someone to be able to do a search, whether it be under the federal sphere or the provincial sphere. Has there actually been discussion about the interoperability between provincial and territorial systems, or are there going to be different programs for different provinces and you'll need to get a different sign-in code for each individual province?

You're going to have some that will be charging a fee, which raises the point, Mr. Schaan, of whether or not the federal government will be charging a fee for access to the registry. If you don't know, just tell me that, but I'd like to find out how your department views this work in that kind of scheme.

[Mark Schaan]

The commitment has been that the registry will be free and that it will be searchable.

It does two things that are important for the purposes of ease. One is that it adopts the beneficial ownership data standard—the international standards for the collection of information related to beneficial ownership—which means that the way we collect the information is interoperable with the information that's collected by our international counterparts and by provincial counterparts, should they adopt the international standard, which is increasingly common.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I appreciate that there's an international standard. I appreciate that Canada is trying to align with that. The question is, will someone have to go to a different site to access the information? Will they be subject to different provisions provincially than they would be from the federal one?

[Mark Schaan]

Each province and territory—and the federal government, obviously—offers the opportunity to incorporate in their jurisdiction. To date, the two provinces that have adopted beneficial ownership registries largely conform to almost identical capacities in terms of what they ask of the individual corporation. They've used the beneficial ownership data standard, and with the exception of very small administrative differences, they are basically the same. We are building the system with the capacity to ingest and onboard provinces and territories into the system.

It's worth noting that there's a precedent for this. There's a system called MRAS; it's a common front end to all the corporate registries in the country that pings the individual back ends of all the provincial and territorial registries. It was a common project adopted by the provinces and territories and the federal government, so we've done it before. The capacity for us to be able to ensure that we have a federal registry that has the capacity—we've built it with that in mind. The full intent of the government is to make this a one-stop shop for beneficial ownership registry information.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

It could have the potential to do that—to have that interoperability to be a one-stop shop—but it's yet to be concluded.

[Mark Schaan]

The Constitution lets us work with the provinces and territories in the realm of their jurisdiction, which includes the capacity to incorporate.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Albas.

I want to thank the officials for being with us this afternoon. It's much appreciated. Thank you for taking the time.

Just before I let you guys go, as you know, next Monday we are doing clause-by-clause study on precisely this bill, Bill C-42. With your permission, I'd ask for additional resources and maybe one more hour for the meeting so that we could have a full panel of witnesses and then do clause-by-clause study. I think that would be useful for this committee.

If that's okay, that's how I'll proceed. I'm not sure if the House will provide the resources, but I'll ask on behalf of the committee.

[Some hon. members]

Agreed.

[The Chair, Liberal, Joël Lightbound]

Perfect.

On that note, thank you, everyone. The meeting is adjourned.