International Trade Committee on Dec. 6th, 2010

[Martha Hall Findlay, Liberal, Willowdale, ON]

Excuse me, but—

[Alain Deneault]

Otherwise, the big problems that will surface in terms of tax havens and the issue of such an agreement are that there will be significant losses in collective wealth because tax evasion, tax leakage and audacious tax practices will continue.

So, at this point, there is reason to be against it, not to mention all the problems related to bi-directional money laundering in both jurisdictions. I think this obviously isn't the right time or place to go into details, but all these reasons are really good ones for opposing the agreement.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Do you want to say no, too?

[Brigitte Alepin]

You are asking us to answer yes or no. What is the question exactly?

[Martha Hall Findlay, Liberal, Willowdale, ON]

We are trying to determine whether we are going to support this agreement. This is part of what committee members do. I really want to know if you, as witnesses, want us to support this agreement or not.

[Brigitte Alepin]

When I gave my presentation earlier, I think I was clear on the fact that not only—

[The Chair, Conservative, Lee Richardson]

No, you weren't.

[Brigitte Alepin]

— you are forced to say yes because of the international tax competition, but you are going to say yes. That's what's going to happen because you don't have a choice, given—

[The Chair, Conservative, Lee Richardson]

Okay. I think that pretty much wraps it up. I'm sorry, but we are over the five minutes, and we do have to carry on to allow everybody an opportunity.

Monsieur Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chair.

I would like to continue on the same topic, Ms. Alepin. To the question that the member from the Liberal Party asked you, you said that we will say yes. The issue of tax fairness is a very important principle to me. Mr. Deneault just said that there will be significant losses in revenue, that the Quebec tax system will lose significant revenue. You also talked about globalization. I think it would be preferable for the government, through its power to intervene—the power to negotiate a free trade agreement—should say that, if we do not agree on the principles of tax fairness, we will not conclude the agreement. You said that you know that we are going to accept the agreement in the name of globalization, but, at some point, some political parties will have to stand up and say that we must oppose it, also in the name of tax fairness.

[Brigitte Alepin]

What you are saying is very interesting, but in reality, from the moment we opened the markets to multinationals and allowed them to shop for tax systems, we put these systems into tax competition with each other. Here, we are talking about the agreement with Panama, but we could also very well be talking about free trade agreements with all the tax havens, and the discussion would be the same. All these discussions would have one thing in common: the competitiveness of our Canadian businesses. I am the first to say the same as you did, and I said it in my presentation earlier: reducing taxes for business is a major problem that must be discussed outside the Canada-Panama agreement. I mean no disrespect, but it needs to be discussed at an international table, and not this one here.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

I agree with you completely, but I have a very specific question for you. You wrote a book called Ces riches qui ne paient pas d'impôts. After concluding a free trade agreement with Panama, after concluding an information exchange agreement or not, or on double taxation, will there not be an advantage for wealthy Canadians who will not pay taxes?

[Brigitte Alepin]

Not only will more people not pay tax, but on top of that, what's much more significant—

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

More poor people will pay more tax.

[Brigitte Alepin]

— and I will try to explain that in 30 seconds. In all taxation principles for managing a country, there is one that I think is extremely important, and that is that there must always be a balance between voters, markets and the state. Obviously, we know that the markets have become more important than the state and perhaps even more important than the voters or the general public. We know that. It's okay and it's known because we believe in the virtue of the markets. However, we need to analyze all tax reductions for business. This doesn't mean just the rich and super-rich; this endangers this balance that we're trying to maintain between the state, the markets and the public.

Suppose that this is okay and that the fact that the multinationals sometimes become more powerful than the state itself has become a reality. Very slowly, because of discussions like the one we're having here, that focus on an agreement with a tax haven—and next year, it will be with another—we will in the end allow a global reduction in taxes for business. The situation will have to be analyzed in a context in which the relationship among markets, the state and voters will be thrown off balance. One day, we could very well find ourselves in a situation where the state has much more power than the two other levels. Furthermore, the markets would not pay tax, and the entire tax burden would be transferred to actual people.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Excuse me, we only have five minutes.

Mr. Deneault—

[Brigitte Alepin]

Fine.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

— I would like a simple comment on the fact that there will be more rich people. At the same time, the direct consequence of that, the poor people will have to pay more for the tax burden of Canada and Quebec.

[Alain Deneault]

I can add something about this political problem. Funds that escape taxation are not just sitting on exotic islands far away, or in countries like Panama. These funds are being put to use and mixed with the proceeds of crime.

A French judge, Jean de Maillard, said that, these days, we no longer distinguish between legal and illegal economy, since they are mixed together. I am not going to quote all the UN, European Union or French criminologists I mentioned, but they would say that when we invest in Panama, it is money laundering, disguised as investment, at the same time as we are finding out here that the Colombian mafia are active and sending funds back to Panama.

We see that there is a sort of funnel between the two systems, and we will make it easier for criminals to launder money by creating all kinds of legal ways to disguise dirty money as clean money. It's a very serious political problem that goes above and beyond the simple tax evasion mentioned by Ms. Alepin, who I completely agree with.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you.

[The Chair, Conservative, Lee Richardson]

Mr. Julian.

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

Thank you very much, Mr. Chair.

I would also like to thank our three witnesses for being here today.

Since I have only five minutes, I would like to move immediately to my questions.

Since the start, the problem with Panama has been money laundering and criminal activity. As you know, the United States Internal Revenue Service has clearly shown that Panama is one of the biggest problems in the world when it comes to criminal activity and tax havens. The government has always implied that there would eventually be an agreement, an agreement to exchange tax information, with the Panamanian government. The government sent a letter last year, but today, just before you arrived, we heard from three representatives from the Panamanian government who clearly opposed a rejection of these requests. They said that—

A tax information exchange agreement isn't in Panama's economic interests.

We're not talking about something that is going to happen eventually. They said that they aren't going to sign it. My Liberal colleague is not talking about agreements on double taxation, which is completely different and avoids all issues relating to criminal activity and money laundering. We certainly need a tax information exchange agreement.

My question is for Mr. Deneault and Ms. Alepin. Given that the Panamanian government refuses to sign this agreement—all that it is offering is an agreement making it possible to avoid fiscal double taxation—should we suspend discussions on implementing this agreement by waiting for the Panamanian government to change its mind?

[Brigitte Alepin]

Because of how this is working right now—you know it because you heard it in committee—even though the Panamanian government had talked about concluding a information exchange agreement, it isn't necessarily a token of good faith or—

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

No, but they said that they would not sign such an agreement because it isn't in their economic interest.

In your opinion, all things considered, should we scrap the implementation of this agreement because the Panamanian government is refusing this tax information exchange agreement?

[Brigitte Alepin]

If the government's goal is to find a way not to sign the agreement, the fact that the Panamanian government is refusing to sign this information exchange agreement gives it a valid reason.