Mr. Speaker, I was not actually speaking from notes, I was speaking from my head on those subjects. Let me tell the hon. member this. In the United States of America a term called formulary apportionment is used rather than the arm's length procedures of transfer pricing.
The present system is this. The Canadian government discovered in the auditing branch one case where a company was selling paper clips for $200 to a Canadian subsidiary to bring down the Canadian subsidiary's profits and then from the Canadian subsidiary was buying tires back for 6 cents each that were made in Canada to bring down the Canadian profits.
The Canadian government looked at that and at all the different systems in effect throughout the world. In the United States there is a system called formulary apportionment promoted by the state of California. Most states in the United States have this. They did it with foreign multinationals but they even did it with domestic tax. They made a judgment on the portion of the company's operations in each state.
In other words California said, we are going to make a judgment here. We are going to decide after looking at the entire operations-the company would have to open its books-how much the operations are paying in each one of the states. That led to double taxation.
The international multinational companies will not go to California because of that. California had to drop it but it is still a principle that is being promoted.
We should have more investigators in Canada. The hon. member and I agree on that. A lot of money is tied up here. There is $10, $20 billion at stake. However, what has been done in Canada, which is probably the best system, is sign an agreement.
The investigators go after each one of the multinationals and sign a pre-agreement, an agreement in advance. It is a secret agreement, because one cannot go around telling everybody what one's operations are.
An agreement is made in advance. That has cut down on a lot of the violations in Canada. That is the reason why the office is so small. It is a very effective and well run office.