Public Accounts Committee on Feb. 26th, 2014

[Richard Montroy]

The question as to whether we can use stolen information is really quite relevant. In English, I would call that

“the fruit of the poison tree”.

I cannot answer that question today as far as Canada is concerned, because we still have not dealt with that type of situation. However, our legal advisors have confirmed that we can indeed use the information. To follow up on what you said earlier, I would like to add that in France, a court of first instance ruled that the government did not have the right to use the information. However, the decision was reversed on appeal. Therefore, under French law, the government is now allowed to use stolen information.

[The Chair, NDP, David Christopherson]

That's it, we're on the money, right on the dime.

Okay, for our last question, we'll go over to Mr. Hayes.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

I don't think so. I could take one—

[The Chair, NDP, David Christopherson]

I'm only going by what I've been told here.

Mr. Albas.

[Dan Albas, Conservative, Okanagan—Coquihalla, BC]

Thank you. Could we pass to Mr. Woodworth?

[The Chair, NDP, David Christopherson]

Sure, no problem.

Mr. Woodworth, you have the floor, sir.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Thank you very much.

I'd like to continue with the conversation we had a little earlier, Ms. McMahon, because what we've heard today is that there has been significant demonstrable success to this Liechtenstein project, and what we have heard today is that there has been significant financial recovery and benefit from the audits. But we also heard continual questioning from the opposition about why taxpayers weren't prosecuted.

I know in your report you shed light on the use of these non-prosecution agreements by the CRA as a means of gathering information and intelligence, and in paragraph 9.28 you've indicated that these agreements did serve a purpose. So I assume it was the proper approach for CRA, and I would like you to comment a little on why that approach was necessary and why we were better served because of the intelligence gathered.

[Marian McMahon]

Thank you for the question, Mr. Chair.

We didn't evaluate whether it was the appropriate action. We audited the actions undertaken by the agency. By the time our audit had started, the agency had already entered into these agreements, so we reviewed the purpose, the reason behind entering into those agreements. We stated we didn't evaluate any post-mortem on that, and we do mention that they should analyze their own success or lessons learned from the use of those agreements on a go-forward basis.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Could you elaborate a little about what you discovered concerning the purpose of those agreements?

[Marian McMahon]

Thank you, Mr. Chair.

Where we say specifically that the agency informed us of the purpose of the agreements.... They had made a trade-off between either obtaining information by entering into the agreement or considering prosecuting taxpayers, and we just state what management had told us.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

For example, you state in a positive sense in paragraph 9.24 as follows:

In a criminal prosecution, the Agency must ensure that the information obtained will hold up in court. Once a taxpayer learns that he or she is being investigated with prosecution as a possibility, he or she is no longer obliged to provide information to the auditor.

Are you saying that you didn't verify those statements? I took them to be accurate statements and I'm not sure now from your answer if you're telling me that you didn't mean them to be accurate or verifiable statements.

[Marian McMahon]

Yes, they are verifiable statements. The auditors we are referring to are the Canada Revenue Agency staff.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

The fact is that I can take it to the bank that once a taxpayer learns that he or she is being investigated with prosecution as a possibility, he or she is no longer obliged to provide information to the auditor. Is that correct?

[Marian McMahon]

Yes.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

In fact, one purpose for a non-prosecution agreement would be to induce the individual to provide information. Am I on the right track there?

I'm just trying to read what you wrote and understand it.

[Marian McMahon]

Go ahead.

[Heather Miller, Director, Office of the Auditor General of Canada]

Mr. Chair, could I answer?

The agency was dealing with a situation whereby taxpayer information was provided to them at a fairly low level. They didn't have a great deal of detail. Early on in the chapter we explain in paragraph 9.7 that all they had was the name or date of birth and a dollar amount for some of these people, so in some of these cases, when they entered into the agreement, it wasn't so much that if they went into the agreement they could waive prosecution, although that was the result. When they were going into the agreement with these taxpayers they couldn't possibly have been in a position to prosecute because they didn't have any information, so on obtaining the information from the taxpayers, had they not signed the agreement, they wouldn't have received the information. It's a chicken and egg situation.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

The whole point of this division is to obtain sufficient information to assess the taxes owing.

[Heather Miller]

And to learn about how these structures are set up and how to go forward from these. That was part of the mandate of this project.

[The Chair, NDP, David Christopherson]

Very good. Thank you.

We have concluded a full rotation of our questions and by previous agreement we will move forward, but beforehand, first of all, on behalf of the committee let me thank our guests today and let me also emphasize the appreciation we have for both the fulsomeness but also the tightness of the responses, which is not easy to do. So very well done.

Thank you so much for being here. We appreciate it. You may now leave and head home to your families.

Colleagues, you're not quite so fortunate. I will suspend this meeting for a few moments to allow people who are not included in the business section of our meeting to leave, and also to allow the technicians to reset. We will reconvene in a couple of moments in camera to do committee business. This portion of the meeting now stands suspended.

[Proceedings continue in camera]