Public Accounts Committee on Feb. 14th, 2007

[The Chair, Liberal, Shawn Murphy]

Thank you very much.

Mr. Christopherson, up to five minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Mr. Chair.

I'd like to follow up on questions regarding the Canada Revenue Agency, on this whole business about not having the international auditors. There was some talk about tax havens and inability to do proper risk assessment.

The reason it's important is that this is, in large part, where big money is. There aren't too many steelworkers in downtown Hamilton, in my riding, who are taking advantage of tax havens and offshore tax treatments, etc., but they are the taxpayers who have to make up the difference when those who already have money can hire high-end auditors to work the numbers for them. So I consider this to be pretty big, although it's not a large, looming issue in all of these reports.

I know you've already acknowledged that you don't have a dollar figure--perhaps we can ask Canada Revenue for it--but roughly what are we talking about? You know the old saying, you talk enough millions, pretty soon you're talking real money. What's the potential here for tax leakage whereby either programs are not going to be paid for or somebody who's already paid their fair share is going to pay someone else's fair share?

[Sheila Fraser]

I really don't have that information, Mr. Chair. I don't know that the agency itself has done that study, but that's something that certainly could be asked of them.

[David Christopherson, NDP, Hamilton Centre, ON]

You see, I know there's a lot of noise out there...and I'm sure some of it's warranted. It's happening in the U.S. too. Once you've done everything you can on the right wing to go after tax cuts, and to get as much as you can when you already have lots, then you go after the revenuers with talk of “unfair”, and try to put a chill in there.

Again, it's not the steelworkers in Hamilton who are raising this. It's the people with the big bucks already who are doing this. And my concern is that the areas that aren't being looked at just happen to be the areas where the most wealthy are. We know what the history of money and politics has been in Canada. Notwithstanding the changes in the last couple of years...but historically, and these are historical issues.

That's what gives me some concern. It's not deliberate, but it met certain unspoken political priorities, that we just won't do a whole lot in that area because we get too much heat when we do; let's go elsewhere.

So this is a concern for me. Every time I hear “tax haven”, I think of all the shipping lines and others who've taken advantage, as Canadians, of these tax havens. Basically, they're just not paying their fair share of the tax rate. I don't know how we would go about that.

One thing I want to talk to you about, Chair, is the possibility...and we've never done this before, so if it's a non-starter, so be it.

Right now when we call up a chapter we bring in the deputy, and they bring in all their folks, and the Auditor General comes in with all her folks, and we spend the whole two hours doing that one chapter. But let's say we have a couple of questions where a full two hours may not be required but you don't want to let something go. I wonder if there's a method or some means whereby, for issues that don't have a requirement for two hours, we could look at bringing in two of them, at an hour each, just to get at a few things. Because something like this....

Again, think of all those hard-working Hamiltonians—Mr. Sweet represents Hamiltonians also—paying their fair share and carrying the freight, and then think of the possibility whereby those who are already dripping in wealth don't have to pay their fair share. If we don't jump in and defend those hard-working Hamiltonians, who will?

I leave that with the committee to think about. Maybe there's a second way you can do that.

If I have any time left, I'd like to go to advertising and public opinion. We haven't done that yet.

[The Chair, Liberal, Shawn Murphy]

You have 45 seconds.

[David Christopherson, NDP, Hamilton Centre, ON]

Hmm, 45 seconds. It takes me that long to clear my throat.

In the 2003 audit, you found that with regard to department public opinion research—you remember public opinion contracts, everybody, we spent a little time on those things—20% did not demonstrate why their research was needed. In this report you have the same percentage.

Maybe you can talk to us a little bit about the implications of not meeting these needs. In other words, what is not being done, and why should that matter to us?

[Sheila Fraser]

Again, there is a process required in the policy under which the department should clearly demonstrate why this public opinion research is being carried out. They also have to submit all of that to a group of experts within Public Works, who can then challenge the methodology and make sure there's coordination if another department is doing similar research.

So it's really to have appropriate research done in the most effective and efficient way possible. If they're not following those policies, there's a risk that won't be the result.

[David Christopherson, NDP, Hamilton Centre, ON]

We know what happens when those risks are not dealt with.

Thank you, Chair.

Thank you, Auditor General.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Christopherson.

The next person is Mr. Rodriguez. I understand you're splitting your time with Mr. Wrzesnewskyj, so I'll give you each two minutes.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Mr. Chairman.

With respect to managing the Coast Guard fleet and marine navigational services, you said that vessels are less and less reliable.

Does that mean that they are dangerous?

[Sheila Fraser]

It means that they are less available for operations. They spend more time being repaired.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

So, you're not saying there is any danger for sailors, in this case.

[Sheila Fraser]

No.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

But you did say that the fact that they are less reliable or less available means that and I quote “[...] certain key fish stock surveys had to be cancelled because vessels were not available.”

The fishing industry is already going through some difficulty, so this is not helpful at all. Does Fisheries and Oceans Canada have some options in this regard?

[Sheila Fraser]

We did not explore that. We considered large vessels which serve scientific purposes, supporting the Department of Fisheries and Oceans. We consider these surveys very important because if we do not have them, we do not have accurate information on which to make decisions regarding fishing quotas, etc.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

That is precisely what I find worrying.

Has it been postponed every time, or sometimes completely cancelled?

[Sheila Fraser]

Some of them have been completely cancelled.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

That is serious.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you, Chair.

Madam Fraser, you stated something quite worrisome. You said we're lacking people with expertise in international taxation and we can't provide the salaries to compete for that expertise.

Who is hiring these experts?

[Sheila Fraser]

This is a particular problem in the greater Toronto area. People with international tax expertise are highly sought after by large corporations, or large legal firms or accounting firms that provide tax advice to these corporations.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

So the very entities we need to be able to analyze and monitor quite closely—multinationals and the law firms and accounting firms that represent them—that have potential tax avoidance benefits in the tens or hundreds of millions of dollars are the ones that are hiring the best experts.

[Sheila Fraser]

Absolutely.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

What is the department doing to address this issue? Have they made requests to the government? This is a serious area of concern. We're in a world that's becoming more globalized when it comes to industry. Profits are not just being moved in a paper method to offshore havens; manufacturing is being done in a number of countries. There's inter-company accounting for products that move between countries with different tax levels. So we don't have the expertise to really do a good job of monitoring this situation.

[Sheila Fraser]

The issue we're reporting here is particularly problematic in the greater Toronto area. There is expertise in other offices, and we are recommending to the agency that they need to develop a national strategy. We note, for example, that a very significant portion of the international auditors in the greater Toronto area have less than two years of experience. They need to use people in other offices on the high-risk, more complex files, which in many cases are in the greater Toronto area.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

It doesn't appear the government has done a study to quantify the various categories of potential loss.

Has any outside body done an analysis of what Canada is potentially losing on an annual basis?