Public Accounts Committee on Feb. 26th, 2014

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Pardon me, I'm not referring to specific cases, but I want to clarify the distinction between these two directorates. Am I right that they would each have different objectives? I think you said yes. What would you have considered to be the objective of the unit that you did audit, and what objective were you measuring against in your audit?

[Marian McMahon]

What we looked at was, as mentioned in....

If the file had an agreement in place, then it wasn't to be referred to that division at all. So for those, that was the first—

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

I'm sure I'm not asking my question correctly, because I don't seem to be getting it across. What do you consider to be the objective of the division that you were auditing?

[Marian McMahon]

To assess taxes where warranted.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

Okay. Everything it does, therefore, is obviously to be directed to that objective, right? I just want to know I'm on the right track in understanding your report.

[Marian McMahon]

Yes.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

For example, you say in paragraph 9.28 that “the agreement served a purpose for the Liechtenstein list audits”. Can you articulate for me what purpose it was that the agreements were serving?

[Marian McMahon]

As mentioned in the previous paragraph, because this was the first time the agency had received this type of information, there was a choice being made on whether to acquire information through this agreement to learn about how some of these structures were set up or to acquire their information to continue with assessing further files.

[The Chair, NDP, David Christopherson]

Sorry, sir, your time has expired.

[Stephen Woodworth, Conservative, Kitchener Centre, ON]

I'm already out of time.

Thank you.

[The Chair, NDP, David Christopherson]

Very good. Thank you.

Before I turn it over to Mr. Simms, I'd like to bring it to the attention of members that although Mr. Simms has been with us for a short time, a powerful time, he is actually now moving on to another committee. Ms. Jones will be our new permanent member. As a result of the scheduling, Mr. Simms is actually here as a substitution today.

I want to take this opportunity, on behalf of all members of the committee, to thank you for your time here. Your positive contribution has been much appreciated. Thank you, sir, for your time here.

You now have the floor.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you very much, Chair. You're very kind. My time was short, but it certainly was a good time. Thank you.

I still hope, by the way, that you carry on to Newfoundland, on the island, this summer to do that.

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

He's expecting it.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

That's right. Well, you have another Newfoundlander—sorry, Labradorian—so there you go.

I want to go back to this exchange that took place here. I'm not quite clear about the criminal investigation part of it whatsoever. It's not so much the division and how this works, but it seems to me, if I can quote here, that there were valid reasons for six of the cases:

...there were valid reasons that led to the conclusion that no referral would be made, in accordance with Agency procedures.

Of the eight files, “the Division did not accept either for further investigation.” Why was this the case?

Is it because of the system we have that we couldn't do that? Or did you feel that in these particular cases it just wasn't necessary?

[Richard Montroy]

Thank you, Mr. Chair, for the question.

On the criminal investigation front, in the courts, you have to prove something beyond a reasonable doubt. That's as opposed to the work we do in the audit world, which is civil assessments. You raise an assessment based on the preponderance of evidence. The people on the criminal investigation front have to look at whether there's enough evidence to support a prosecution. If that's the case, then it goes to public prosecutions, PPSC, to carry the ball from that point.

In the few cases we saw here in Liechtenstein, there was not enough evidence to support the laying of charges. That's because there was so little information on file, we were not able to pursue.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

So this was because of the particular cases. It wasn't because the tools in the toolbox we had prevented us from doing as such.

[Richard Montroy]

That's correct.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

That being said, though, with these new tax agreements, let me ask about jurisdictions, in particular foreign jurisdictions. I'll read out paragraph 9.35. It says:

Information requirements about unnamed persons.... The Agency has begun issuing these notices to foreign banks operating in Canada, but there are challenges to getting information about offshore investments. Foreign jurisdictions do not have to respond to these types of requests.

That's even though they have an entity within this country?

[Richard Montroy]

Thank you, Mr. Chair.

The whole area of information holding is very complicated. It's an excellent question, because it's something we're faced with often. If the information is held in a bank in another country, we cannot use the Income Tax Act, an unnamed person requirement, to force them to give us information. Clearly they're not residents of Canada.

This is why the TIEAs are important. We can use the TIEAs to go to the Cayman Islands of the world, the Bermudas, the Bahamas, and get their tax administrations to get the information from the local financial institution.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

So you're saying that for those countries that we do not have associated TIEAs we could be in a situation where our investigators are absolutely frozen. If they're holding an account, despite the financial institution's presence here, if they are headquartered somewhere else in the world, then obviously we can't do that.

[Richard Montroy]

This is a subject that's near and dear to my heart because I was one of the people who negotiated the first five TIEAs. The Canadian government took a step back and looked at what countries are of most interest to Canada. Since that time we prioritized the various countries, which is why you see TIEAs with Bahamas, Bermuda, Jersey, Guernsey, the British Virgin Islands, etc. B.V.I. has not come into force yet, but we've come to an agreement with them. Those are the countries that we typically see Canadians investing in.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

I'm going to switch gears again as I only have a few seconds left. I just want to talk about 9.40, which states, “Up-to-date guidance would be useful for auditors. As of the end of our audit, the wiki page”—as it's called, for information that was gathered during the process with Liechtenstein—“was not developed enough to be helpful.”

Even today, is that correct?

[Richard Montroy]

Yes.

Go ahead.

[Gina Jelmini]

We're in the process of developing the wiki page and it will be used by the offshore compliance specialized teams when they're implemented fully in April. So we are developing it now and we're progressing well on it.

[The Chair, NDP, David Christopherson]

That's it.

Very good; perfect timing—we're doing well, colleagues.

Mr. Falk, you have the floor, sir.