FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, February 17, 1998

• 0902

[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call this meeting to order and welcome everyone this morning. We are studying Bill C-28, the Income Tax Amendments Act, 1997.

This morning we have appearing in front of us Mr. Howard Wilson, ethics counsellor. Welcome, sir. As you know, you will have approximately 10 to 15 minutes for some opening remarks, and thereafter we will engage in a question and answer session. Welcome.

Mr. Howard Wilson (Ethics Counsellor, Industry Canada): I thank you very much, Mr. Chairman. I'm pleased to have received your invitation to appear before the committee in your consideration of Bill C-28.

[Translation]

My specific purpose is to respond to allegations that the Minister of Finance, the Honourable Paul Martin, is in conflict of interest because of his sponsorship of this bill.

I would first like to set out some of the facts and then what I consider to be the relevant issues regarding conflict of interest.

I first learned of these allegations on the morning of Tuesday, February 3, 1998. They had been raised by Yvan Loubier, the member for Saint-Hyacinthe—Bagot, during debate on this bill in the Commons on February 2. Specifically, the assertion is that section 241 of the bill proposes amendments to paragraph 250 of the Income Tax Act affecting the taxation of companies engaged in international shipping. This was then linked to Mr. Martin's ownership of Canada Steamship Lines (CSL), which has substantial investments in international shipping.

I was not previously aware that this measure was in the bill. I spoke early on February 3rd to Mr. Stuart Hyndman, one of the supervisors of Mr. Martin's blind management agreement, as well as to Mr. Pierre Préfontaine, vice-president and counsel for CSL. I wanted to determine whether or not this particular measure before Parliament would affect the company.

• 0905

Mr. Préfontaine later that morning informed me that the company does not utilize this provision of the Act and furthermore has not intention of doing so even with these proposed amendments. As currently structured it has no use for the provision. It was made clear to me that it would make absolutely no sense for the company to pursue this course as it would require substantial reorganization and large costs with no corresponding benefit.

I think it is important to set out, for the record, some of the chronology on these amendments, which I obtained from the Department of Finance. Interest in these changes began as long ago as 1990 when the Government of British Columbia established a non-profit organization, the International Maritime Centre (IMC) Vancouver, to encourage foreign shippers to move to British Columbia. This organization and foreign shippers began lobbying for changes to the Income Tax Act, which were agreed to by the federal government in 1991. Later, in 1994, IMC Vancouver wrote to the Minister of Finance asking for a meeting to discuss the need for clarification to section 250. To avoid any possible conflict of interest, the matter was referred to the Secretary of State (International Financial Institutions) and the department met several times in the course of the year with IMC Vancouver to discuss in greater detail the need for technical amendments to this section.

In August of 1994 there was correspondence by the Secretary of State with IMC Vancouver leading in December 1994 to a further letter from the Secretary of State confirming an intent to recommend amendments to this section. These amendments were released in the draft technical bill in April 1995, which was subsequently revised and released publicly in June 1996. They were included in Bill C-69, which received first reading in December 1996 but died in the last Parliament. These amendments are now part of C-28.

[English]

However, in my view, whether CSL could use the amendment or not is irrelevant to the conflict of interest issue. This is a point I must insist upon. The Government of Canada, including the Department of Finance, must remain free from time to time to deal with matters directly affecting the Canadian shipping industry. What is relevant is whether Mr. Martin was involved in any way with the process by which the department came to a conclusion that these amendments were desirable, and he was not.

Members of the committee are aware that ministers are subject to the provisions of the conflict of interest and post-employment code for public office holders, the most recent version of which was released by the Prime Minister in June 1994. It succeeded an earlier code, which was issued in 1985. I have provided copies to the clerk for your information.

What provisions does the code require of ministers, and specifically Mr. Martin, so as to avoid not only real and potential but also apparent conflicts of interest between their private interests and their public responsibilities?

[Translation]

Ministers are required to provide a confidential report listing all assets, liabilities, and outside activities for themselves, their spouse and their dependent children. Mr. Martin provided this information.

The Code distinguishes between three types of assets. The first category, exempt assets, includes personal residences, vacation homes, personal effects, cash, bank deposits, Canada Savings Bonds, Guaranteed Investment Certificates and mutual funds. These are considered not to involve any potential for conflict between the public responsibilities of the office holder and his or her private interests.

• 0910

The second category, declarable assets, includes interests in family businesses or companies of a local character that do not contract with the Government; farms and their commercial operations and rental property or vacant land. The Code permits the public office holder to deal with these assets but they must be publicly declared.

[English]

The last category, controlled assets, means assets that could be directly or indirectly affected by government decisions or policies and includes publicly traded securities. The code requires that these assets be divested either through sale or through the establishment of a blind trust or blind management agreement.

In terms of outside activities, the code prohibits ministers from engaging in the practice of a profession, actively managing or operating a business or commercial activity, retaining or accepting a directorship or office in a financial or commercial corporation, holding office in a union or professional association, or serving as a paid consultant.

Mr. Martin has publicly declared that he holds 99% of the voting shares of Passage Holdings Inc., a federally incorporated investment holding company, which in turn has a significant ownership position in a number of other companies, including the CSL Group Inc. and Canada Steamship Lines. These are controlled assets, and divestment is required by the code. Divestment must be by sale or through the establishment of a blind trust or a blind management agreement.

A blind trust agreement is an acceptable form of divestment for publicly traded securities. While the minister is obviously aware of which shares were placed in the trust, he or she will have no knowledge specifically of the composition of their holdings as shares are subsequently bought and sold by the trustee. All they may receive is periodic information on the overall value but not the composition of their holdings, as well as data sufficient for the purposes of filing their taxes.

A blind trust agreement was not appropriate, however, in Mr. Martin's situation, since his holdings are not publicly traded. In this type of situation, my office requires the establishment and disclosure of a blind management agreement. This places in the hands of the supervisors or trustees the assets held by Mr. Martin in Passage Holdings. Mr. Martin is obviously completely aware of the nature of his private interests, but through this agreement, he is prevented from being involved in the management of these assets.

[Translation]

The CSL Group has a wide variety of dealings with the Government of Canada and continues to do so. What is particularly important is that any dealings they might have with the Department of Finance do not involve the Minister of Finance. To ensure that this is the case, Mr. Martin instructed his Deputy Minister as well as his Executive Assistant that any dealings the company might have with Finance not involve him in any way nor that he be informed of these dealings. I have attached to my statement a copy of the original letter he wrote to the then Deputy Minister, Mr. David Dodge.

[English]

Decisions taken by the Minister of Finance have an effect on all Canadians. Therefore any decisions he might take on corporate tax will also apply to the CSL Group. Policy on subsidization programs might also affect these companies, as it would other firms. These are issues where his private interests may be affected, but only in a general way, along with many other companies operating within the Canadian economy.

It is not necessary for the Minister of Finance to withdraw from policy discussions or decisions in this type of circumstance. It is well accepted that conflict does not arise in a situation of general application or as it affects a person as a member of a broad class.

There are some other areas, however, where decisions would have a very specific and direct impact on his private interests. This would be the case regarding shipbuilding policy or decisions regarding the subsidization of VIA Rail, because of his interest in Voyageur.

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Mr. Martin decided that he should not participate on these issues and has therefore delegated responsibility to his Secretary of State, initially the Honourable Doug Peters and now the Honourable James Peterson, for shipbuilding, marine transportation, VIA and the St. Lawrence Seaway. It was because of this that the Secretary of State handled these amendments that are before the committee.

Since the establishment of the blind management agreement, the Department of Finance has stayed in close touch with me. I have been kept informed of issues as they have arisen that might, if Mr. Martin were to deal with them, constitute a potential conflict of interest. In this particular case, the department proceeded properly by not involving Mr. Martin at any time. He told me he first learned of the matter only two weeks ago when it was first raised in the House.

However, I was not informed and I should have been. The department agrees with this. I have clearly established that in no way was Mr. Martin involved in the consideration of this issue, and all decisions were taken by the Secretary of State. There was therefore no real conflict of interest. Nonetheless, Mr. Martin sponsored this bill and questions have been raised by some members that this constitutes an apparent conflict of interest.

Had I been informed in advance, before this bill or its predecessor, Bill C-69, was tabled, there would have been a discussion on how best to handle the tabling of the bill under the name of the Minister of Finance, who is responsible for all tax legislation. It seems to me there would have been three choices: first, that Mr. Martin table the bill, as actually happened; second, we might have concluded that another minister should table the bill; and the third option would have been to have the minister table the bill but in the tabling include an explanatory note from the department explaining the background of these proposed amendments and the fact that it was a matter exclusively handled by the Secretary of State.

On the basis of what I now know—that these amendments are only technical, that they have been under public discussion since 1995, the fact that it was a west coast organization that was seeking these clarifications, and the fact that the department had excluded the Minister of Finance from any involvement—I would have been led to the conclusion that the third option would have been the most appropriate in the circumstances. After all, we are dealing here with an omnibus bill containing many amendments, none of which, other than clause 241, raise the slightest suggestion or appearance of conflict. However, this prior consideration of our options did not take place as it should have.

At the direction of Mr. Martin, the department and I have reviewed their internal procedures and concluded that any issues that might touch in a direct and specific way Mr. Martin's corporate interest need to be referred by departmental officials to Mr. Mark Jewett, assistant deputy minister and counsel to the Department of Finance, who will discuss these with me to the extent necessary, as he has in the past.

[Translation]

Mr. Chairman, before concluding, I would like to indicate that in the package of material I am circulating to the Committee through the Clerk, is this opening statement, Mr. Martin's public declarations which include the text of his blind management agreement, the Conflict of Interest Code, and some questions and answers I prepared in March 1994 when Mr. Martin first came into compliance with the Conflict of Interest Code. These were widely circulated at the time so that there was not doubt, publicly, as to what specific steps Mr. Martin had taken to respect both the letter and most importantly the spirit of the Code. One further comment, Mr. Martin's public declarations which I have circulated to you, are reviewed annually to ensure that they are up to date. Additionally, Mr. Martin has gone well beyond the disclosure requirements of the Code by making available for inspection by the public, in my office, extensive additional details on his corporate interests and their dealings with the Federal Government. This document is also brought up to date annually.

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Let me conclude, this measure was sought by a west coast organization which was interested in attracting foreign shipping companies to establish head offices in Canada. The Income Tax Act was amended in 1991 to achieve this. The amendments under discussion today in Bill C-28 were, from the beginning, handled exclusively by the Secretary of State (International Financial Institutions). Mr. Martin was totally isolated from the issue. The measures established to avoid placing Mr. Martin in an apparent conflict of interest worked except for the fact that I should have been aware of this matter in advance and been able to consider the options for how the Bill should be tabled. We have reviewed the Department's internal procedures at the direction of the Minister. But I can be clear. There is no substance to the allegations. Mr. Martin has not been in a conflict of interest.

[English]

Mr. Chairman, my conclusion bears repeating. This measure was sought by a west coast organization that was interested in attracting foreign shipping companies to establish head offices in Canada. The Income Tax Act was amended in 1991 to achieve this.

The amendments under discussion today in Bill C-28 were from the beginning held exclusively by the Secretary of State, International Financial Institutions. Mr. Martin was totally isolated from the issue. The measures established to avoid placing Mr. Martin in an apparent conflict of interest worked, except for the fact that I should have been made aware of this matter in advance and been able to consider the options for the tabling of the bill.

We have reviewed the department's internal procedures at the direction of the minister, but I can be clear. There is no substance to the allegations. Mr. Martin has not been in a conflict of interest.

I would like to thank the committee for this opportunity to explain the background and the issues involved, and I am happy to take any questions.

The Chairman: Thank you very much, Mr. Wilson.

Now I will move to the question and answer session. Mr. Ritz, do you have a question?

Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.): Thank you, Mr. Chairman.

Thank you, Mr. Wilson, for your presentation.

The purpose of this bill, as I understand it, is to level the playing field internationally in the tax treatment of international shipping firms and so on. Is that one of the provisions you are speaking to this morning?

Mr. Howard Wilson: I don't want to give the committee the idea that I consider myself to be a tax expert. I think Mr. Farber, during his testimony last week, did in fact deal with this matter, but I do understand from the department that this measure is to allow those foreign shipping companies located abroad to establish their head offices in Canada.

Mr. Gerry Ritz: I'm wondering why, if we have these reciprocal agreements between other countries and Canada, which basically say we're going to tax everyone the same, anybody would register outside Canada.

Mr. Howard Wilson: I'm not the person to pose that question to. As I say, I'm not a tax expert. I was asked to deal with the conflict of interest allegations.

The Chairman: Thank you, Mr. Wilson.

Mr. Ritz, perhaps you could just focus on Mr. Wilson's presentation and the subject matter expressed in that presentation.

Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Good morning, Mr. Wilson, and welcome to the Standing Committee on Finance. For the same reasons given by Mr. Wilson, I find that his presentation lacks credibility. When he talks about technical details and says that he had discussions with the people running the company who assured him that there was no problem with the bill, the provisions of which did not affect him. But there is a problem because, as he just stated, he is not an expert in tax planning. And I don't think he's an expert in tax planning as regards international marine transportation either.

Therefore, and this is my first question, how can he make a judgement on what the people from CSL tell him when they say that there is no point in applying the provisions of clause 241 of the bill to amend paragraphs 250(6)(a) and (b), since "it would require substantial reorganization and large costs without corresponding benefits"? How can he say that, although in response to a question by my colleague from the Reform Party, he conceded that he was not an expert in taxation? How can he accept the explanations of the people running the company concerned without obtaining more information?

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[English]

Mr. Howard Wilson: Mr. Chairman, let me make two points here. One, I can tell the committee in slightly greater detail what the company has told me with respect to these particular measures. I first spoke to them on February 3, 1998. They told me that they do not use this particular provision and had no intention to do so in future. I also continued to have discussions to understand better what the measures would mean. What they told me after further discussions with their lawyers and their accountants is that this particular measure is a deeming provision, which would then allow a foreign-located company, if it located its head office in Canada, to be deemed to be under foreign control.

[Translation]

Mr. Yvan Loubier: Mr. Wilson, between what people tell you—

[English]

The Chairman: Order.

[Translation]

Mr. Yvan Loubier: I'm sorry, but I asked a question. Does he or does he not have the ability—

The Chairman: No.

Mr. Yvan Loubier: Mr. Chairman, please give me the time I need. You reduced the time Mr. Wilson is to appear by two hours in less than two days. I have a question for Mr. Wilson and I've not had an answer. Like the Prime Minister, he goes off on another track. I want to know whether he is an expert in the area of tax planning—

The Chairman: Mr. Loubier—

Mr. Yvan Loubier: Excuse me. Is he or is he not able to judge the relevance of the information he receives from CSL?

The Chairman: Order!

[English]

Mr. Loubier, I'll tell you something. If you got up this morning on the wrong side of the bed and you think you're going to push the chair around, go back to sleep.

Mr. Wilson, you're going to have the opportunity to answer the questions as fully as you want. You can go back to the original question.

Mr. Howard Wilson: Thank you.

As I said, I wanted to make two points in answer to Mr. Loubier's question. I can only relate what the company has said. They are now structured. If they have to in effect close down the operation in Boston and move back at considerable cost to Canada, in their view, and of course their advisers have so told me, there would be no benefit whatsoever.

This is the point I think the committee must take into consideration. Whether CSL would benefit or not from this measure is completely irrelevant to the allegations of a conflict of interest. CSL will benefit whenever a tax measure comes down in some way. If taxes go up, presumably it will not benefit, but it will be part of a broad class. It is affected by the Government of Canada and its actions. The way that we must go about and avoid a conflict of interest is to ensure that a matter of specific interest to the company is not handled by the Minister of Finance. That is the issue, the committee must understand, that is related to conflict of interest.

The Chairman: Mr. Loubier.

[Translation]

Mr. Yvan Loubier: Therefore, Mr. Wilson, you consider that you are not a tax planner or an expert in this area. Last week, the question was put to a real specialist, Mr. Farber, to whom the Minister of Finance had referred us since his statement of February 5. You indicate in your document that Mr. Martin must not become involved in any way with his shipping companies or tax situation, but I would point out to you that he cheerfully went ahead and did that on February 5 when he stated, in front of the cameras outside the House that he wasn't affected by this, etc. First, how could he have known that this did not affect him if he hadn't followed the process and examined the bill?

Second, how is it that, contrary to the allegations by the company and the Minister, when Mr. Farber was shown a business structure which was exactly the same as Mr. Martin's, he was obliged to acknowledge that such a provision could benefit the CSL? And yet you are telling me that it doesn't matter whether it benefits CSL or not? I find that incredible!

That means that any legislator—and you recognize that in this paper—sponsoring legislation which may affect property placed in a blind trust, may find himself or herself in an apparent, potential or real conflict of interest. Given that the Minister is sponsoring this bill, how can you reconcile that with your statement that it doesn't matter whether it affects CSL or not, and whether the shipbuilder is also the legislator? This means that your code of ethics is quite clearly in trouble.

[English]

Mr. Howard Wilson: No, I think the code works well. I think the procedures we have work well.

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[Translation]

Mr. Yvan Loubier: Really? It works well to your advantage.

[English]

Mr. Howard Wilson: The question that I stated and answered directly was whether I should have been informed at the time about this particular amendment, which was very specifically related to the international shipping industry. I have said clearly, and the department agrees, that I should have been informed. Then we would have sat down, as we have in the past on other measures, and considered how the tabling should take place. I indicated in my statement that I thought a third option, one in which the minister tabled the bill but the department provided an explanatory note, would have been the most sensible approach.

What is important here is that the minister never touched on this issue; he was not even aware it was there.

As for the company, I can only repeat that the company told me as recently as yesterday that this measure...they are already located there. They have a foreign-owned company located in Boston, and for them to move and restructure there would be an enormous expense, with no corresponding benefit.

[Translation]

Mr. Yvan Loubier: I am nevertheless pleased to see the position you take on page 7 of your presentation. You do recognize that things did not go very well and that if you were to start again, you would not proceed in the same way. You also acknowledge that there is an apparent conflict of interest by the Minister of Finance with respect to clause 241 of Bill C-28.

I have a question I would like to ask you. It is just being accepted that there is an appearance of conflict of interest, something which the Prime Minister, the Deputy Prime Minister and the Minister of Finance have been denying for two weeks. You yourself state this in writing, and I think it is a reasonable step in the right direction. But don't you find it a little strange—and you didn't mention this in your opening statement—that in a Bill which is 464 pages in length there should be a clause referring specifically to international shipping and taking up one and a half pages of the 464? Don't you find that this might sow the seeds of doubt in our mind from the beginning and subsequently? The answers you have given me do not convince me, quite the contrary in fact, of the lack of apparent conflict of interest.

[English]

Mr. Howard Wilson: Let me say that I have spent some considerable time understanding this issue since you first raised it. I consider the matter a serious matter. I have looked at it seriously, and I have come to the conclusion that the department proceeded properly in not involving Mr. Martin in any instance in this. Mr. Martin was not involved. I think we have looked at and benefited from this experience...to ask whether our procedures worked as well as they should have. My answer is no, they did not work as well as they should have.

We have put in place measures to ensure that this will not again occur. The fundamental point is that Mr. Martin was not involved. A question was raised on the 2nd of February by you, and I think I am here to try to provide an explanation to a serious issue.

[Translation]

Mr. Yvan Loubier: You recognize that because of the way things were done, there may be an appearance of conflict of interest. Mr. Martin is the Minister of Finance. He is the legislator, the person who makes tax legislation and who introduced a Bill amending the Income Tax Act, with certain provisions referring strictly to international marine traffic. And, as you mention in you opening statement, he periodically receives information on his holdings, including information needed for his tax return. Would you not therefore agree that he knows what he needs to protect himself in terms of taxation? This is what clause 241 does: it protects the revenue generated by holdings held outside the country by Canadians, which corresponds exactly to Mr. Martin's business structure.

Would you not agree that he has such information on his personal situation, that he is the legislator, legislating in an area where he is fully aware of changes to his revenue, cost and other factors? He is sponsoring a Bill, he is introducing it, he denies any appearance of conflict of interest, let alone that there is any conflict of interest, and on February 5, he made a statement explaining that this did not affect him. He is therefore aware of what this Bill contains.

There are three conflicting versions: yours, according to which Mr. Hyndman and Mr. Préfontaine stated that the company did not intend to use the legislation; Mr. Martin's version which states: "This doesn't affect me in any way since my companies are Canadian and the provisions of the Bill apply to Canadian-owned foreign companies"; and the version of Mr. Préfontaine himself who states that there is no problem since this has never been used.

• 0935

Taking all this together and given what you acknowledge as an appearance of conflict of interest, don't you think that there is quite a problem here? And given the high level of integrity required by the position, there is also quite a problem with Mr. Martin as Minister of Finance even without the lingering doubts. And during your appearance here, you yourself have added to these doubts.

[English]

Mr. Howard Wilson: Let me come back to the beginning question you raised, which was that here in this very large bill, there's a page and a half that deals with this measure. You ask whether it's possible then for Mr. Martin, in the handling of it, to ensure that his company is going to benefit.

Mr. Loubier fails because Mr. Martin was not involved in any way. This was a matter that had been raised by the department. It was raised following the amendments of 1991 by this west coast organization that wrote to Mr. Martin. But Mr. Martin never responded to that letter. The response by the department was made by the Secretary of State. It was the Secretary of State who handled exclusively all discussions with this company and who came to a determination that this was in the national interest. So these amendments were then made. Mr. Martin was not involved at any point in the process.

It so happens that the way CSL has been structured since 1992, to use this particular provision, the company and its accountants tell me, makes absolutely no sense. They would have had to go through substantial restructuring and considerable cost to achieve a result they already have in the way they are currently structured. But Mr. Martin was not involved, so the key fundamentals of your position are not sustained by the facts.

[Translation]

Mr. Yvan Loubier: I would argue that my position is even more sustained by the facts because you have just added strength to my argument. You have just contradicted your own Code of ethics. Page 2 of your Code of ethics, which states the principles with which anyone holding public office must comply, reads as follows:

(5) On appointment to office and thereafter, public office holders shall arrange their private affairs in a manner that will prevent real, potential or apparent conflicts of interest from arising;

You have just said in your statement and in your comments that there was an apparent conflict of interest. From what you have said, has one of the provisions of your June 1994 Code of ethics not just been breached? Has the Finance Minister not put his foot in it with this apparent conflict of interest, and is he not in direct violation of one of the provisions of your Code of ethics?

[English]

Mr. Howard Wilson: The Minister of Finance was not in a conflict of interest. The Minister of Finance was not involved in all of these things.

I have said though that the fact that the matter was tabled by the minister raised allegations of an apparent conflict of interest. Had our procedures worked perfectly, we would have looked at the question. I think we would have concluded that because of the nature of the amendment, because he was not involved from the inception, he could properly table the bill, but it would have been best if the department had included in it some explanation of the background to this matter.

My presentation this morning was to try to put those facts before the committee in detail.

The Chairman: Thank you. Mr. Riis.

Mr. Nelson Riis (Kamloops, NDP): Thank you very much, Mr. Chairman.

First of all, I think we have to say that we owe a great deal to the statement you've given us this morning, Mr. Wilson, in terms of clarifying a whole number of issues. We owe another word of thanks to Mr. Loubier for finding somehow that this happened.

I wish I were a lawyer this morning so I could go through this a little more thoroughly, but I'm not. I'll have to do the best I can as a lay person.

First of all, you tell us that Mr. Martin introduced a bill he knew nothing about, presumably. You said that he was unaware of the one part that affected his holdings. This says something about the process itself, such that the Minister of Finance is saying he wants to introduce legislation parts of which, at least, he knows nothing about.

Mr. Wilson, you say that as currently structured his companies would not use this provision. Fair enough. That's as currently structured. They could use it in the future, but they have no plans, they tell you. We have to accept it, of course. That's all you can go on. They may be quite happy with this new structure. At the moment they're not making any changes, for obvious reasons. So we appreciate that comment.

• 0940

Also, you do say that you were not informed and you should have been informed. As a matter of fact you go on to say, on page 7, that normally you would have been informed. You added to your statement that

...Mr. Martin's corporate interests need to be referred by departmental officials to Mr. Mark Jewett, Assistant Deputy Minister and Counsel to the Department of Finance, who will discuss these with me to the extent necessary.

To this you added “as he has in the past”. So this process is well known. It has been used in the past, but for some reason it wasn't used this time. It's causing you, I suppose, a slight—well, not you, but the process is under some question because of this. It has been used in the past, as you say, but it was not used this time. Fair enough. You do point out that it should have been, but wasn't.

Then you go on, Mr. Wilson, and you do say there is therefore no “real” conflict of interest. I don't know if you chose that word consciously. It certainly appears to be a conflict of interest of some kind, but perhaps no “real” conflict of interest.

You know, Mr. Chairman, this raises a whole number of serious questions. Why weren't procedures followed? Why did the minister introduce a bill about which he knew nothing about the provisions that obviously had an impact on his company? And yes, he likely did not know of this, as you say, Mr. Wilson, but we don't know that. I mean, that's of course what you understand.

It just raises a whole set of questions. I don't really have anything I can ask about your presentation, because I think you're just doing what you have to do, and you've done it well. But it does open up a question for us as a committee. I mean, do we just say “Well, there's no real conflict of interest. The appropriate procedures weren't followed, the correct procedures weren't followed; the procedures that normally would have been followed were not in this case, in a situation where his companies could benefit”? I just don't think we can sort of say “Well, I guess this is just the way things are”, and move on from this point.

I'll just leave it at that, Mr. Wilson, and say thank you for revealing a whole number of inconsistencies in the process. I find it amazing that the Minister of Finance would actually introduce legislation he says he knows nothing about. It questions the whole process, and I just say you've done us an immense service this morning. Thank you.

The Chairman: Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Mr. Wilson, you have established that you should have been involved earlier, that precedents had been established in the past in that you were involved in other similar situations where there was at least an appearance of a potential conflict of interest. Why do you feel you were not involved in this case?

Mr. Howard Wilson: I think the answer is that this has been viewed as a purely technical amendment; that the substance of change to the legislation took place in 1991; that there were clarifications, however, that were being sought by this organization on the west coast because of some uncertainties within the 1991 changes. I think it was viewed as being purely and simply technical, so I think a conclusion was reached that this was not an issue of policy substance.

There has been a very long discussion since December 2 on this, so I think it's important to try to deal with these in depth.

I have concluded that there's no real conflict, but there were allegations of at least the appearance of a conflict. That is why you have got what I hope is considerable detail on my examination of this—that allegations were made that there was an appearance of conflict. I have said that is right—that there was, but there's no substance to it—in other words, that the way the process was handled worked properly.

I think you have to be able to deal in the conflict of interest—certainly in the world I work in—and must be able to answer as accurately as possible allegations that may be raised about an appearance of conflict. There generally is an answer, and that answer I think is here—that he was not involved in any way.

• 0945

Mr. Scott Brison: Second, you said repeatedly that the issue here is Mr. Martin's involvement, not whether or not there is an impact of this legislation on CSL or any of his holdings. You said any impact would in fact be irrelevant to a discussion of conflict of interest, and that the issue here is Mr. Martin's involvement in the actual legislation. Is that accurate?

Mr. Howard Wilson: Yes, it is accurate, and it's worth while trying to understand. The Canadian shipping industry has a lot of dealings with the Government of Canada, and they may well want to make representations to the Government of Canada for some change in the law. Because the Minister of Finance happens to have some shipping industries is not.... The government must remain free to be able to deal with these kinds of propositions that will arise from time to time.

How do we ensure there is not a conflict? We ensure that Mr. Martin does not participate in any way in those discussions. On maritime policy he will not participate in cabinet meetings. He will not be involved in his department in their consideration of these matters. That is how we deal with these questions.

Mr. Scott Brison: Then if the issue is Mr. Martin's involvement, why did you engage in the conversations with CSL relative to the impact or non-impact of the legislation on CSL? Why would that be relevant?

Mr. Howard Wilson: Well, because on the morning of the third, here were allegations having been made in the House of Commons the day before by Mr. Loubier, of which I knew absolutely nothing. This was a very technical matter. I didn't know. I talk to the company all the time. I'm the person here who does deal with the company. The company does not deal with the minister. So I did ask them to find out whether these measures affected them in any way. It was a point of information, sir.

Mr. Scott Brison: But you said that is not important. As you went further, you stated that it may or may not have a potentially positive impact on CSL. You said they're not exercising it at this time or operating in a way that it would be advantageous, but if they chose to do so in the future, it might be advantageous. I just find that inconsistent with your assertion that Mr. Martin's involvement is the only issue, when in fact you have delved at some level into the impact of this legislation on his holdings.

Mr. Howard Wilson: Let me explain. The accusation was that the company would be a major beneficiary of this. That was in fact the political context in which the debate was taking place. I thought it important to seek clarification from the company on just what this measure was about, which I knew nothing about.

The conflict of interest issue is whether or not he was involved. There's no inconsistency, but there was a political context within which I was trying to uncover as many of the facts as I possibly could.

Mr. Scott Brison: I would suggest that if one were trying to obtain information on whether or not a particular piece of legislation would benefit someone like CSL, one would probably use other sources than CSL. I'm not a tax expert, but I am a business person, and if I were an executive of CSL, I may not be as objective as a lot of other people might be on this issue.

First of all, if in fact the issue is Mr. Martin's involvement and that is the whole issue, not the impact, I still personally don't see the relevance or the importance of a discussion with CSL.

Secondly, I would suggest that CSL would not be the correct source of clarification on that type of matter, because of the subjectivity they would have relative to any of the implications of this legislation.

Mr. Howard Wilson: Clearly the reason it was not necessary to go and seek someone else's advice on how CSL might benefit from this was simply that the issue of conflict at the end is whether or not Mr. Martin was involved in the decision. I would find it very strange to have a situation, Mr. Chairman, whereby any measure taken by the Department of Finance had to be analysed carefully to see what possible benefit it might have on CSL. I don't think that is the standard by which one can fairly assess the question of conflict of interest. You can assess that fairly by saying that on some very specific matters that affect that particular industry, Mr. Martin must not become involved. That was recognized in the department, and Mr. Martin was not involved.

• 0950

The Chairman: Thank you, Mr. Brison and Mr. Wilson. Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman.

To be crystal clear, Mr. Wilson, in your inquiries have you been entirely satisfied that the minister was not involved in any way with the preparation or the shepherding of these amendments?

Mr. Howard Wilson: I am absolutely convinced of that. The department made it clear to me, the minister's office made it clear to me, and on several occasions the minister has made it clear to me.

Mr. Tony Valeri: According to your inquiries, are you satisfied that the entire process was handled by the Secretary of State?

Mr. Howard Wilson: Yes, there is absolutely no doubt in my mind of that.

Mr. Tony Valeri: Mr. Wilson, does that then lead you to the clear view that any charge of conflict is completely unfounded?

Mr. Howard Wilson: That is right.

Mr. Tony Valeri: Mr. Wilson, understanding that the issue with respect to conflict of interest actually lies in the involvement of the minister in the preparation of these amendments, were you satisfied in your dealings with CSL that the company does not make use of these provisions?

Mr. Howard Wilson: Yes, I am satisfied, Mr. Valeri. The company uses other provisions. They told me that some years ago, when they were planning their international operations, they had considered the possibility of using this, and it was rejected on grounds that I think only tax lawyers and accountants could fully comprehend.

Mr. Tony Valeri: Is it your understanding, Mr. Wilson, that even if the company did intend to make use of these provisions, it would have to undergo such a radical restructuring that it would become virtually a different company altogether, and that the disadvantages of such a move would far outweigh the theoretical benefits?

Mr. Howard Wilson: What I can say, Mr. Valeri, is that is what the company said to me.

Mr. Tony Valeri: Is it also true that the issue of conflict of interest as raised by the Bloc actually has little to do with the impact of these changes on the company, which we know is not at all in the practical sense, but rather on the involvement of the minister in the changes? And isn't that in fact what you've been emphasizing this morning?

Mr. Howard Wilson: That's right.

Mr. Tony Valeri: And by that measure, am I correct in saying that you believe there is no conflict whatsoever?

Mr. Howard Wilson: That is my conclusion.

Mr. Tony Valeri: Am I correct in saying that your view is that the department should have consulted with you, but by ensuring that the amendments were handled by the Secretary of State, the minister behaved exactly as he should have?

Mr. Howard Wilson: The minister behaved exactly as he should have.

Mr. Tony Valeri: Finally, Mr. Wilson, at the end of the day, doesn't the issue of conflict really come down to the substance of such allegations? And are you satisfied that these allegations of conflict have no substance whatsoever?

Mr. Howard Wilson: Mr. Valeri, when allegations of conflict are raised I think it is important that they be looked into in depth, their substance dealt with and a conclusion reached. It was my intent in providing this detail to say to the committee that I have examined the matter in depth and I have found no conflict.

Mr. Tony Valeri: Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Valeri.

Any further questions? Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you.

Mr. Wilson. Could you outline for the benefit of the committee the nature of your office in terms of the resources you have available to undertake the kinds of investigations you've talked about—the experience, the expertise, and what you can draw on? I think that is important, because many times you stated “I have done this”—I assume you are using a collective I—“with the resources available to me”. I think it's important that we understand what experience and expertise has been brought to bear in looking at a comprehensive portfolio of investments, etc., and the implications they may or may not have.

• 0955

Mr. Howard Wilson: Yes, it would be improper for me to have indicated that I did all of this myself. I have an office of 22 individuals. A number of them have been working in the field of conflict of interest for well over 15 years under a variety of circumstances as these codes have evolved.

I've only been involved myself since the spring of 1993, but our office, through contacts with our provincial counterparts and with others internationally, has developed substantial expertise in terms of how to best deal with the question of conflict of interest. When questions do come up and I'm asked to look into something, I can draw upon not only my internal resources but those belonging to the Government of Canada more broadly.

Mr. Paul Szabo: Thank you. I think that's useful.

The specific question with regard to the Minister of Finance is one issue, but the process probably interests me more. In the normal course of your investigations, is it a requirement of your position that should there be recommendations with regard to what happened, what appeared to be happening, what should have happened—has that report been fully made to all relevant parties?

Mr. Howard Wilson: Within the Department of Finance, yes. I have discussed this with the minister. I have discussed this with the legal counsel to the department and they have taken steps necessary to ensure that the general counsel is made aware of similar situations in order that he and I, if necessary, can have discussions. He and I, as I indicated, have had a close relationship over the past several years, and we customarily do talk about these sorts of things. We did not talk about this particular issue.

The Chairman: Mrs. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you.

The question was raised about a minister putting a bill forward and not being intimate with absolutely every detail. I assume the kind of scrutiny we're talking about with the Ministry of Finance happens in other ministries as well. Can you comment on safeguarding the conflicts of interest and huge bills such as this that touch on so many acts going through?

Mr. Howard Wilson: My understanding from the Department of Finance is that on these technical bills the minister is made generally aware of what it contains. In this instance it would have been improper for them to have briefed him on this particular matter, since he had not been involved, and the political sign-off had come from the Secretary of State.

The Chairman: Thank you, Mrs. Redman and Mr. Wilson.

I'm going to give Mr. Solberg one final question.

Mr. Monte Solberg (Medicine Hat, Ref.): Thank you, Mr. Chairman.

Mr. Wilson, thank you for coming. My question concerns your quizzing of CSL officials about the implications of this change for them. From what I understand, you're saying they told you this will have no benefit for them in the short run, but did you verify this with any tax experts or anybody who would have knowledge of how this potentially could help them? If not, why not? Otherwise it looks like you're operating in a closed system. I think it would be important that there be somebody on the outside—you've already indicated you're not a tax expert—who can verify what the impact would be on CSL.

Mr. Howard Wilson: I had two sources of information. One was that provided by the Department of Finance, which says—

Mr. Monte Solberg: They're not on the outside, though.

Mr. Howard Wilson: I'm sorry, but let me answer your question. I had raised it with CSL just to better inform myself, because from the beginning the important issue in my mind was whether the minister was involved in this. I was particularly concerned about verifying that, and I was able to verify that the minister was not involved in any way.

I am less troubled by a measure coming before Parliament that might positively affect some of the minister's interests, but if it is specifically related to that industry, I am very fundamentally concerned about whether the minister was involved. That is what we established in 1994. It is the essence of avoidance of conflict, both real and apparent.

• 1000

I asked the question because it was a political context; the debate was centred on this. I have argued here that it was not the relevant question specific to conflict; it nonetheless has continued to surround the discussions in the committee and it did surround the debate of the last week or so. I did seek clarification. I did ask the company to give me as many details as possible, and they have explained in depth to me why this would make absolutely no sense or, more importantly, how much it would cost them to now restructure as a result of these changes. I consider that to be quite sufficient for what was more a political question rather than a substantive conflict issue.

Mr. Monte Solberg: But there's no outside verification?

Mr. Howard Wilson: No.

The Chairman: Mr. Wilson, thank you very much for a very thorough presentation. I think you've addressed some very important issues, which are important to all committee members.

[Translation]

Mr. Loubier.

Mr. Yvan Loubier: I would like to thank Mr. Wilson, Mr. Chairman, but not in too final a way because I would like him to come back before the Finance committee to help us study this matter in more depth.

Rather than allaying our fears and denying our allegations, this morning, he has rather confirmed a number of points. First of all, he has acknowledged that he accepted the CSL's version whereby the company would not profit, and at the same time he confessed that he was not a tax planning specialist.

Second, he said that it is not important whether the Minister profits or not, provided he was not involved in developing the process. That defies understanding. The Minister of Finance can protect his position regarding his income tax. He is the person who passes tax laws; so he will not have any difficulty using them to back up his case with Revenue Canada. There will be no problem.

Third, he recognized in his statement that Mr. Martin sponsored the bill. This has been consistently denied in the House of Commons for two weeks when we were questioning the Prime Minister and the deputy prime minister on this matter.

Moreover, he acknowledged, on page 7 of his statement, that there was an apparent conflict of interest. The fact that there was an apparent conflict of interest is in direct violation of the June 1994 Code of ethics. So, we still have more question to ask him.

The opposition parties—and I will conclude with this, Mr. Chairman—last week signed a letter asking you to set up a special sub-committee of the finance committee to shed full light on the amendment to clause 250(6) made by clause 241 of the bill. I distributed a copy of this in French and English.

I would ask that you accept our request, because after this morning's meeting there are still many areas on which we need to shed light. There are still some unclear points that need to be clarified. There are also contradictions between Mr. Wilson's testimony and what has been said for the last two weeks.

[English]

The Chairman: Thank you very much for your point.

I do want to bring to the attention of the committee members, and I know many of you have sat on committees before so you probably know procedure, that the item you referred to is number four on our agenda. It will be dealt with accordingly after the presentation by Mr. Wilson.

Once again, thank you very much, sir, for a very thoughtful and comprehensive presentation.

Second, after we hear from other witnesses—we have a second group this morning—we'll deal according to the agenda with the item you just raised.

[Translation]

Mr. Yvan Loubier: Mr. Chairman, I would ask you to rule immediately. We are not going to move on to something else and then come back to clause 241. Last week, we wasted our time on this matter. What I want to know is whether you will agree to establishing a sub-committee to delve into the matter, not only with Mr. Wilson, on the ethical considerations, but also with tax planners, with—

[English]

The Chairman: Mr. Loubier, you know—

[Translation]

Mr. Yvan Loubier: I would like this matter to be decided before we hear from the other witnesses, who are going to be talking about completely different issues.

[English]

The Chairman: Mr. Loubier, you know as well as I do that in order to strike a subcommittee it has to be a decision of committee members of the committee itself. I placed it on the agenda today so we can discuss that particular proposal. I think that's the direct way to do it, and it's the way I'm going to do it.

• 1005

We're going to move to the next presentation and welcome the presenters: Chief Waquan, chief executive officer; Laurence Courtoreille; Ian Taylor, director of economic development; and Peter Ranson, accountant from the Mikisew Cree First Nation.

Welcome, gentlemen. We look forward to your comments, and I'm sure they will help us in studying Bill C-28. As you know, you have 10 to 15 minutes for your presentation and thereafter we will engage in a question-and-answer session. Welcome.

Chief Archie Waquan (Mikisew Cree First Nation): Thank you, ladies and gentlemen of the committee, and good morning. I am chief of the Mikisew Cree. I'm here today to address this committee about the proposed amendments to paragraph 149(1)(d) of the Income Tax Act. I have also brought some technicians with me. They will be happy to help me answer any questions after I finish this presentation.

The Mikisew Cree First Nation is located in the extreme northeastern corner of Alberta, on or around the shores of Lake Athabasca. Our principal reserve land sits on either side of the hamlet of Fort Chipewyan. Established in 1788, it is the oldest permanent settlement in Alberta.

For nine months of the year travel in and out of our community is possible only by boat or plane. The winter months allow for the construction of a temporary winter road that allows us to stockpile essential materials for the remainder of the year. Unfortunately, this year that important support for our economy has been lost and our regional authority has declared a local emergency. Fuel and food are now being airlifted into our community at great expense to all concerned.

The Mikisew Cree First Nation is by far the most influential group in this region in population, organization, and innovation. In a few short years my first nation has developed a variety of corporate structures to address the economic effects of being one of the most isolated communities in this country.

Since about 1985 Mikisew Cree have made some bold attempts at change. In response to the direction of our community members, we have set about creating a number of businesses. We have set up companies to manage fuel distribution, air travel and shipping, construction, building materials, and labour services for the oil sands developments to our south, which is Fort McMurray.

Unlike corporate structures in mainstream Canada, our companies are not designed to return a dividend or profit to shareholders. Instead, they are designed to provide opportunities for our members in training, employment, and the delivery of essential services to the life of our community. The goal is to reduce dependence on outside materials, skills, capital, and transfer payments from social assistance.

• 1010

It is in this development of self-reliance that the proposed amendment to paragraph 149(1)(d) is so very important.

With recent announcements by the big oil companies of more than $20 billion in new oil sands investments, our community is prepared to launch an aggressive bid to organize and participate in what all observers agree will be a sustained period of growth and prosperity for the entire region.

Participation in this new oil sands activity will produce returns for the Mikisew for 10, 15, maybe 20 years. These returns will be reinvested in training, employment, and planning for the sustainable use of our renewable resources such as tourism, fishing, and controlled timber harvesting. These new industries will support development for our children and grandchildren for 50, 100, or 150 years.

If the amendments to paragraph 149(1)(d) contained in Bill C-28 become law, it will have the effect of gutting economic development in our community, as well as in the communities of many other first nations. We need the exemptions contained in paragraph 149(1)(d) to develop self-sufficiency.

The Income Tax Act is based on the Canadian Constitution. Because of this it can only be changed or adjusted by Parliament in full view of all Canadians. This cannot be understated. Under paragraph 149(1)(d) a first nation that is organized, controlled, and operates as a real government receives the same protection from taxation as do other governments on different levels in Canada.

When a first nation faces the design and development of their institutional and management structures on this provision, two very important things happen. First, economic development through investment, construction, and job creation takes place with the assurance that all income will be reinvested in the community and will not leak out through dividend payments, profit taking, or taxes. This has the effect of creating a pool of capital for further development and reinvestment. In the long run this will increase self reliance.

Second, by developing the governing and management structures needed to be eligible for exemptions, first nations are developing the foundations of self-government. In this regard my first nation, the Mikisew Cree, has made real progress by establishing bylaws for the management of land, land use, and internal and external financial controls, as well as rigid and transparent accountability measures to our community.

The Mikisew are well on their way to completing a constitution, including a comprehensive set of bylaws that will provide for the Mikisew Cree precisely the same protection the Constitution of Canada provides for the mainstream population.

• 1015

This is exactly what the Canadian governments and all the parties represented here have been trying to do for years: the development of legitimate aboriginal government consistent with both the letter and spirit of the constitution of Canada.

Without the protection of paragraph 149(1)(d) only a tiny handful of first nations in this country will enjoy the land base, resource base, locational advantage, or opportunity for jobs needed to become self-sufficient and self-governing. If the proposed amendments to the Income Tax Act are passed, then all the progress will be reversed.

With great respect for the wisdom and knowledge of this committee, we request today that you consider adding one paragraph to the proposed amendment. That paragraph could read as follows:

For greater certainty the 90% requirement necessary for income to be considered exempt as noted in 149(1)(d) shall not apply to the corporations, commissions or associations of Indian first nations as defined under the Indian Act or self-governing legislation when such entities are:

1) 100% owned or controlled by one or more first nations or Indian bands;

2) use returned income for promotion of training, education or employment of Aboriginal persons; and

3) promote band governance, the creation of reserve infrastructure or self-reliance.

Ladies and gentlemen, thank you for taking the time to listen to me. We would be very happy now to answer some of the questions you may have. I also have technicians whom I brought along with me.

I don't have all the answers, but through my wisdom and a lot of years of being chief of my first nation, I am sure that I can attempt to answer some of your questions. If not, I have technicians I brought with me to answer some of what may come up as you may be rigorously grilling me.

The Chairman: Thank you for a very thoughtful presentation and for bringing to light some of your concerns.

We'll now move to the question and answer session. Mr. Ritz.

Mr. Gerry Ritz: Thank you, gentlemen, for your thoughtful presentation.

I just have one thought. As legislators we always walk this fine line when we're dealing with tax entitlements for some people, and not for others. We have to sell this to the general public.

Do you envision a sunset on your amendment, once you have the reliance you're looking to attain and it is rolling along for you? Do you see yourselves coming into mainstream Canada as taxpayers, or do you see this amendment going on in perpetuity?

Mr. Peter Ranson (Accountant, Mikisew Cree First Nation): Yes. The simple answer is yes. I think that is foreseen somewhere down the road.

Can we set a specific date? I think that's difficult to do. Why? Because when we're talking about various Indian bands or first nations, some are at differing degrees of development. Some are in very dire straits, and some are more advanced than others.

I mean, we see that in British Columbia, where we look at the comprehensive land claims in the works with the Nisga'a people. Yet there are other first nations in British Columbia that are very far behind. They're not on the same time line, if you follow where I'm coming from.

So I think, yes. Can we put an exact date on it? No, I think that's difficult to do. But certainly all first nations, depending upon where they're headed, are not uncomfortable with looking at that issue, and saying that somewhere down the road we don't need to....

• 1020

I think that what's being asked is to level the playing field, or at least to allow us to level the playing field. That's the key. Then we can say, yes, we can put ourselves on the same basis as everybody else at some point in time.

Mr. Gerry Ritz: At the end of your sheet you talk about providing a more detailed technical paper. Maybe those issues could be addressed at that time.

Mr. Peter Ranson: Yes, and they will be.

Mr. Gerry Ritz: Thank you.

The Chairman: Mr. Riis.

Mr. Nelson Riis: Thank you.

Chief, could you give us as a committee a precise example of one of these business ventures that would be influenced by this provision as it is currently stated? Could you give us some detail about the actual business?

Mr. Ian Taylor (Director of Economic Development, Mikisew Cree First Nation): Mr. Riis, we operate a company called Contact Air or Air Mikisew. It started originally as the only source providing air transport for people and cargo in and out of our community.

Because the organization itself provides an essential service and is 100% controlled by the band government, it should fall under the provisions of subsection 149(1).

Under the amendments, because the majority of the income derived from that enterprise is actually generated outside the geographical boundaries—since it is based at an airport run by Transport Canada, and is obviously operating outside the geographical boundaries of the reserve—it will not qualify for that exemption.

Mr. Nelson Riis: Thank you.

Mr. Ian Taylor: Thus we essentially have the essential services being taxed.

Mr. Nelson Riis: Thank you, that precision is important.

Chief, at the outset you mentioned that the reserve centred to your nation is near Fort Chipewyan. You said something about it being the first settlement. What does that mean?

Chief Archie Waquan: This year Fort Chipewyan is about 210 years strong. In the past it's always been known as Little Athens. It was the hub of all the fur industry. That's what created this country. All the furs that went overseas came from that area.

Mr. Nelson Riis: Chief, going back before the fur trade—and this is a bit off the topic—were there not permanent settlements in Alberta prior to that year?

Chief Archie Waquan: There were permanent known.... What do you call it?

A witness: White settlements.

Chief Archie Waquan: White settlements.

Mr. Nelson Riis: Thank you.

Mr. Scott Brison: Thank you again. I join my colleagues in thanking you for your thoughtful presentation.

What would be the total revenues of the companies involved? I just need a ballpark figure for the Mikisew....

Mr. Ian Taylor: I would like to say that sometimes we set up these corporations for profit. They ended up being non-profit. That's not the way we designed it; it's the way things worked out.

Voices: Oh, oh.

Mr. Ian Taylor: The total cashflow for all the nine companies operated and managed by the Mikisew Cree First Nation would be under $20 million.

Mr. Scott Brison: What would be the size of the population in the nation?

Chief Archie Waquan: Close to 2,000. To be exact, it's 1,931.

Mr. Peter Ranson: It's also important to remember that this is gross revenue. That is for all the operating expenses of these various operations. Mikisew, for example, is not getting $10 million in his jeans or something.

An hon. member: Sure.

Mr. Peter Ranson: It's obviously far less.

Mr. Scott Brison: What you're suggesting seems extremely reasonable. But arguably it's extremely wide-ranging, broadly based, and effectively based on Mikisew. You can effectively compete with anybody in any sector anywhere with this tax exemption.

Now, keeping in mind the law of unintended consequences of public policy, this is something we have to be prepared to defend to small-business people everywhere and from every background.

Would you entertain...? For instance, you mentioned Air Mikisew specifically as one area. That's an essential service, and obviously maybe that would be exempt because of that or some other criteria where we could take a look at these nine operations. Some may be essential services, and others would be more from a profit-generating perspective, and thus may not qualify for this exemption.

• 1025

Mr. Laurence Courtoreille (Chief Executive, Mikisew Cree First Nation): I think one must understand, sir, that first of all, we're a government.

Every party here has said that first nations should be self-sufficient, self-reliant. We're no different from municipal governments, except we provide education, social assistance, and health care that non-municipal governments provide in this country. That's the only difference.

The other aspect is that it's very clear that we're very suspicious of the timing of this new legislation. I don't want to get into a legal discussion, but more recently the courts have found through the Otinaka case in Manitoba that first nations look and smell like a government, and therefore should be under section 149.

Coincidentally, the Department of Finance recently introduced new legislation saying that municipal governments must now generate 90% of their income within their boundaries to be tax-exempt. Most of you know that first nations have reserves that are one mile by one mile, and there's no way we're going to create that opportunity within the boundaries of those reserves.

On the other hand, municipalities, especially in Alberta—and I sit as a municipal councillor in Fort McMurray—have amalgamated their region into a municipality, Wood Buffalo, which is larger than Prince Edward Island, and there's another municipality being created. So their boundaries are expanding, and our boundaries are still very narrow and short. And we're expected to be self-sufficient and self-reliant within those boundaries.

If we're not going to depend on the handouts any more, how can we create the businesses to be self-sufficient when as soon as we step off the reserve you want to grab all our profits we generate to create housing, social programs, and education for our people?

Either that.... If you're going to continue with this bill, you might as well just continue giving us bigger welfare cheques.

A voice: That's right.

Chief Archie Waquan: I would like to add to that, please. I have certain philosophies as a chief that I thought I should maybe put at this table. I think that it makes a lot of sense now that we're going in that direction, thanks to Laurence here.

Again, I think there's been a lot of discussion in the past about transparency and about being accountable. There's no other first nation in Canada that's more accountable to its members than Mikisew, and that's a fact. Everything we do in my government the people know about—everything. That's why our by-laws created to protect this government, the Mikisew Cree, are well looked at by my own membership, my constituents.

Now, on self-sufficiency, I think we have an opportunity here to bring to the attention of the Canadian taxpayer that we might have a solution if you were to change this act.

It's pretty hard to find solutions out there to deal with first nations. Well, I realize that, but you have something here you can deal with. You have within your power and within your hands some of the changes you can make for first nations.

We hate—I am going to say this—I hate going to any government for handouts. That's too low, too damn low. I don't think any of you want them. As a first nation's chief, I don't want them.

• 1030

So our philosophy is that we have to be independent. You have before you a bill where you could make that difference, the very difference to make it happen for first nations across Canada.

I have to go south. I have to leave my borders for us to survive, because we have a small reserve. It's very small. Time and time again I've read in the newspapers, I wonder how come these first nations choose areas that are no good to them. Now we have to step out of that very boundary to make it happen for our governments.

I just thought I'd let you know that, because I think it's really important.

Mr. Peter Ranson: Mr. Brison, one of the questions you focused on was what about when you're competing with everybody else. The types of business we're looking at here typically don't compete with other parties. We're not talking about individually owned businesses.

Nobody else would be providing air service to Fort Chipewyan. There's another corporation that provides building services for housing on reserve in Fort Chipewyan. These are not ones where somebody else would be competing with them in the market.

So I think what's being said is where we have real ties or links to the government itself, or to providing services to the first nation, that's where we really want the exemption.

We're not asking for a blanket exemption for all aboriginal-owned businesses. That's not being asked for at all.

The Chairman: Thank you very much. Now we'll move to Mr. Szabo.

Mr. Paul Szabo: I wanted to follow up on an example that Ian gave. I think it's important to understand the intent.

The recommendation you propose whereby 100% of the income of first-nations-owned corporations is exempt regardless of where the income is earned—

Mr. Ian Taylor: With certain provisos.

Mr. Paul Szabo: Sorry, with the proviso that it's 100% controlled. The other two are a little softer. There are no dimensions to it; it's just general purpose.

But I wanted to ask you about whether there are businesses that are 100% controlled whose primary business is to earn income rather than to serve the community, and they do operate. Do you understand that...?

Mr. Ian Taylor: Certainly.

Mr. Paul Szabo: How are we going to differentiate?

Mr. Ian Taylor: Certainly. When we drafted the three points as a condition for the adjustment to the amendment, we had that precisely in mind.

Virtually all the company structures of the mix you have developed over the years have been developed incrementally to meet the specific community need. Where ventures have been set up on a purely profit basis, they've been spun off.

Individual band members are in business selling chips and pop, or providing hot dogs or shoe shines. Service industries that are being developed are created by individuals. They're encouraged to do so, and deal with the tax implications on their own.

The first nation chooses to restrict its investment and organization to devolve services only where we are going to meet that basic criteria of supporting the community and reducing dependency on outside inputs.

Mr. Paul Szabo: Some of these or maybe most of these companies would be incorporated?

Mr. Ian Taylor: Yes.

Mr. Paul Szabo: That means that the financial statements may in fact.... How do you distribute the income for those purposes?

Say the business is incorporated, for instance, for air transport services, and from that activity it makes a profit. Now we want to have that profit applied for the designated purposes of promoting education, training, development, etc. How do we financially deal with distribution of the resources?

Theoretically you'd have to pay dividends to owners, who would then have to pay tax on that as individuals? If you're incorporated, you can get a tax exemption at the corporate level. But if you distribute dividends to an individual, then you have an individual tax situation. So maybe you can help us there.

• 1035

Mr. Ian Taylor: Mikisew Cree First Nation and the chief and council of Mikisew Cree First Nation own and control all assets of the Mikisew Cree in trust for the entire community. As such, they have shareholders in virtually every corporate structure. So it is the apex decision-making body for all corporate operations. As a result, there is not an issue of income coming to one source and then having to be distributed. It all comes to the same place, and it is allocated on the basis of community need.

Mr. Paul Szabo: I have one last question. Could you give me an idea of what percentage of the members of your band live off reserve?

Mr. Ian Taylor: Off reserve it would be approximately....

Laurence.

Mr. Laurence Courtoreille: I'll just give you a bit of history on our community. We're just studying ways of managing a reserve. In 1986, after 65 years of negotiation, we got a settlement on our land claim.

Most of us live in the community of Fort Chipewyan. Through the Department of Indian Affairs we established housing in the community of Fort Chipewyan. We finally moved into the reserve after proper planning, but I must tell you a little story about this.

In 1986, when we finally got our reserve, 90% of our housing was off reserve. Immediately Revenue Canada came on to us and said that if you live off the reserve you are no longer tax-exempt as a treaty Indian.

So we've been dealing with that whole process, including the fact that some of our structures were off reserve prior to the land claim settlement.

We're undergoing a lot of serious negotiations with Revenue Canada, who pounced on us immediately and said you're off reserve now. They were saying, okay, if you have $10 billion, we can move all the houses on the reserve if you want to.

We're undertaken a program over the last couple of years, literally taking our housing and moving it physically onto the reserve through a unique program we worked out with a department. Right now roughly 50% of our housing is still off reserve.

Mr. Paul Szabo: Thank you, Mr. Chairman.

The Chairman: Mr. Ranson.

Mr. Peter Ranson: I wanted to comment just briefly on one aspect that relates to the issue of corporations.

He has to distribute... The funds from the corporation dividends have to be paid, but certain criteria under both section 87 of the Indian Act and paragraph 149(1)(c) of the Income Tax Act would exempt that income in the case of Mikisew.

The other issue relates to the actual creation of the corporations. In all the cases we're using Mikisew as an example, but this is very common with Indian bands throughout the country. The need for corporations is imposed, as opposed to desired, as in many cases. Very simply put, it's questionable whether an Indian band is a legal person under law. As a consequence, many parties out there, whether legitimately or perceived, are uncomfortable dealing with an Indian band. They may be scared about what they think are political problems or political issues.

Oftentimes when it's imposed it may be regulatory requirements. In my province, B.C., the ministry of forests will not issue a timber sale licence to anybody but a corporation. That's a classic example.

So many times it's not by choice, because they would be exempt. If the first nation or Indian band was earning the income directly, they would be exempt on that income, and it's the corporation that's being imposed upon them.

So now they're being put into a structure where they have to deal with these other aspects, and hence the need for the changes in paragraph 149(1)(d).

Mr. Laurence Courtoreille: Also for your information, through our audits the government has requested that all our corporations and all the companies that are associated with Mikisew have to be part of our audited statement. So when we present our financial audits of the Mikisew government, all our corporations are also audited and included in the audit.

The Chairman: Mr. Iftody.

Mr. David Iftody (Provencher, Lib.): This is more of my seeking information here. Presumably by these changes.... I'm familiar with the Cree of Quebec. That's why I asked you what province you were from. Presumably then the Air Quebec airline that is owned by the James Bay Cree—but they have their head office in Val d'Or, Quebec—would be affected in the same way by this. Is that your assumption?

Mr. Ian Taylor: We don't know. We can't say in the situation of Air Quebec how they would move dividends or returns on their investment.

Mr. David Iftody: Okay.

Mr. Ian Taylor: I would go so far as to say that if they were routing the return in the ways we have specified here, if their organization is 100%, as opposed to 51% in a joint venture, or any one of these shadow operations you often see....

• 1040

Being 100% controlled by first nations is where all the income is demonstrably spent on the promotion of training and education according to whatever conditions or standards Revenue Canada would care to impose or negotiate. If it is controlled in this way, and it promotes governance, then we would expect that they would also get a provision. But again, without knowing the specifics of how the structure works, I couldn't comment.

Mr. Laurence Courtoreille: The only comment I'll make is that I'm an elected member of the municipality of Wood Buffalo. All the income we derive is non-taxable.

Mr. David Iftody: On reserve?

Mr. Laurence Courtoreille: No, the municipality of Wood Buffalo. I sit as a council member in the municipality of Wood Buffalo, and all the income we derive with services for our people are non-taxable.

Mr. David Iftody: Well, the Assembly of First Nations have an arm of their head office in Ottawa, but technically, for purposes of the Income Tax Act, the head office is actually located on a reserve in Ontario or Quebec. So the individuals working out of that office are not paying personal income tax, because for the purposes of the Income Tax Act they're deemed to be living on reserve.

We'll take the obvious example. Chief Phil Fontaine, the national chief, is still considered to be living in the community of Sagkeeng in Manitoba—although working here—so his income is deemed to be on-reserve income.

I mean, we are making those allowances, are we not, for personal income tax exemptions?

Mr. Laurence Courtoreille: First, I want to make it very clear that we're not here to talk about a treaty right to be exempt from individual income tax. We're talking here as a government, like the municipality of Wood Buffalo, like the Province of Alberta, or the Government of Canada. We are a government that provides services to our community members.

We're not here to talk about Treaty No. 8, which specifically clarifies that we don't pay any income tax. We're not here as individual members talking about our treaty right to exemption from income tax. Neither are we talking about Phil Fontaine's right to exemption from income tax. We're talking here about a specific government, recognized by Canada through the Constitution, that provides services to our members. That's why we're here saying that as a government we should not be taxed. We should have the same recognition as the courts found a year ago.

Coincidentally, now that the courts went in favour of The Pas Band looking and smelling like a municipal government, suddenly the rules have changed.

Coincidentally, we found the act amendments on a web site. We said, my God, now they're saying that we have to create all our revenue within our reserve boundaries. It's impossible. We're here as a corporation, we're here as a government, not as individuals. We're not here to talk about my treaty rights.

Mr. David Iftody: Yes, Laurence, I didn't want to get into that discussion, because it is a complex topic on a good day, and there are some—

Voices: Oh, oh.

A voice: Is this a good day?

A voice: No, this is a good day.

A voice: It is a good day.

Mr. David Iftody: For the purposes of clarifying this from a public policy point of view, I think we have done some innovative things with respect to personal income tax. I'm very supportive of these.

In fact I'm dealing with a question involving a first nation in Manitoba and a company in my riding that is delivering wood for housing. The rail line happens to stop one eighth of a mile outside the boundary of the reserve. So it has to be taken off the rail car, picked up by truck, and brought to the reserve. Now they have to pay the GST. So everyone is in court over this thing. So precise enforcement of the letter of the law from Revenue Canada on that particular matter is causing some complications.

One of the things I was after here with respect to the questioning.... I have a chartered accountant next to me here, and I might defer to him. Particularly, I have more hair than he does. He was talking about a bad hair day.

Is there some way of structuring this? This is why I used the Cree example. I know Chief Billy Diamond. He's a good personal friend of mine. In fact I'm going to bring this to his attention this afternoon, to find out what the Cree people of Quebec are doing, because the comparative example is very striking. It is an airline owned by a Cree first nation. So I want to bring this to his attention.

I was trying to flush out if this is a problem. Is there some way, for example, of changing the corporate structure of your office that's located at an airport, versus categorizing it as a holding company? Is there some way of dividing that process perhaps to accommodate the concerns of the tax department?

Peter, I don't know, maybe you wanted to answer that.

• 1045

Mr. Peter Ranson: There are a couple of things.

First, just briefly on the other point, in the case of Mikisew, a large number of the employees pay personal income tax. They're not exempt because of where they work. It's important to be clear about that. We're not trying to get an exemption there. That's dealt with separately under Revenue Canada.

With respect to the corporations, the problem we run into is what to do from a legal liability perspective. If we look at Air Mikisew Ltd., one of the problems we have to wrestle with is regulatory authorities. Will they accept a limited partnership? Will they accept a commercial trust where a corporation is acting as a trustee? Then the next question is, what happens if a plane drops out of the sky and kills ten people? All those issues are boiled into it.

Unfortunately we have different types of legislation, ranging from the Indian Act to normal corporate law to tort law to partnership law, that bear on that. Ideally, could we use another structure? Yes, we could, to allow the income to flow through to the first nation. Unfortunately we run into those other constraints, and that's where we have the problem.

If we could create some other vehicle.... For example, in the case of the Council for Yukon Indians, we have settlement corporations, which allow for a tax exemption for a period of time while they're trying to capitalize their communities. But we don't have that, and that's the problem. We still have to live with corporations.

Mr. Ian Taylor: I have a further point. We've spent an immense amount of time, energy, and expense over the years adapting management structures to accommodate the changing regulatory environment that we live in. By entrenching this exemption as paragraph 149(1)(d) in the act, you provide an environment where we can plan over the long term. Probably the single most important element in planning is to know what environment you're dealing with. As I say, we spend a hell of a lot developing structures to accommodate these different environments. This would be a great aid in reducing the costs, creating consistency, and getting on track to where we're supposed to be going.

To follow up on your question from a little earlier about how we would follow through on this, Revenue Canada has their own mechanisms for municipalities and other organizations that qualify under the current exemption rule in the existing act, and conceivably for the amended act. We would simply be tested by virtually the same mechanism, and would accept testing by the same mechanism and criteria, that Revenue Canada would apply to any of the other institutions. Our interest here is not to be treated separately. Our interest here is to be treated fairly.

Mr. David Iftody: Those are my questions. Thank you, Mr. Chairman.

The Chairman: Thank you.

Mr. Valeri, you have one further question?

Mr. Tony Valeri: Yes, a very quick one; it's just a point of clarification. In the last point of the submission, you indicate that you'll be providing a detailed technical paper. Can you just confirm for the committee when in fact we will be receiving that?

Mr. Peter Ranson: Tomorrow.

Mr. Tony Valeri: Great, thank you.

The Chairman: Thank you very much for a very thoughtful presentation. It's bringing to light some very interesting points that we will of course be reviewing upon receipt of the technical paper. Thank you for the suggestions and ways that perhaps we can improve this bill. Once again, on behalf of the committee, thank you.

Now we move to agenda item four, a request to create a subcommittee on clause 241 of Bill C-28. I'd like to bring to everyone's attention, though I'm sure you know this already, that I have received a written request, signed by all four opposition parties, for the Standing Committee on Finance to create a special subcommittee to examine clause 241 of Bill C-28. Of course this is the bill currently in front of our committee.

I believe Mr. Loubier will take the lead in introducing this particular subject matter. Is that correct, Mr. Loubier?

[Translation]

Mr. Yvan Loubier: I can announce, Mr. Chairman, that all the opposition parties agree. To date, the discussions we have had during our study of Bill C-28 on subclauses 241(1) and (2), which amend paragraph 250(6)(a) and (b), have not shed light on all aspects of the issue and on the possible conflict of interest on the part of the sponsor of the bill.

In fact, this morning the ethics counsellor confirmed that the Finance Minister sponsored the bill. We asked the ethics counsellor some technical questions. He admitted that he was not qualified to answer them. However, he took as true the comments made by the CSL executives, by the Finance Minister and those around him.

• 1050

Thus there is a problem somewhere. We are asking that members of Parliament have an opportunity, through the establishment of a subcommittee, to shed full light on this matter. All individuals, organizations or companies that could clarify the matter could be invited to appear.

If my colleagues have something to add, I would invite them to do so.

[English]

The Chairman: Mr. Solberg.

Mr. Monte Solberg: Mr. Chairman, perhaps I'm reiterating, but I think it is important, if there is some doubt about a conflict of interest. For the minister's own sake, it makes sense to explore this a little further, and identify, by talking to people or experts in the field—tax experts and such—whether or not there is a possibility that even inadvertently the minister is benefiting from this. For his sake, I think it would make sense to do this, so obviously we support the idea.

The Chairman: Of striking a subcommittee?

Mr. Monte Solberg: Yes.

The Chairman: Mr. Riis.

Mr. Nelson Riis: Mr. Chairman, considering the comment this morning that the only way to determine whether there is any obvious benefit and so on, and whether the minister was involved, would be a phone call to his company, and they'd say no, they weren't intending to use this provision, or wouldn't, and so on, I guess the question is what would we expect him to say—“Oh yes, we're waiting for this”, or “This looks good to us”, or whatever?

I think we do need a little further clarification. Presumably—I say presumably—with further clarification this would end the discussion. I think for the minister's sake this is required.

My guess is that we ask him if he would support the idea of a subcommittee to just clear the air on this issue once and for all. Knowing the kind of person he is, he would agree. Because if it isn't done, we know what the result will be. It will be an ongoing cloud that will hang over this whole thing for a whole set of obvious political reasons. In the best interests of not only the minister, but quite frankly of the government and the whole country, if everything is what everybody says it is, then let's determine that totally and completely, and get on with it. If not, this cloud will just hang over us.

The Chairman: Thank you, Mr. Riis. Mr. Valeri.

Mr. Tony Valeri: Thank you, Mr. Chairman.

First of all, I take exception to the comment made by Mr. Loubier earlier when he said in his remarks about this motion that the minister shepherd this bill. In fact, as stated by not only the ethics counsellor this morning, but also Mr. Farber when he was here, the minister has had no involvement in this bill. And there is no question this morning that the ethics counsellor has confirmed that the minister did not shepherd this bill, that it was the Secretary of State. That's a whole other issue.

Mr. Wilson came before us this morning as the ethics counsellor, not as a tax expert. The question that was put forward by Mr. Loubier in his submission was whether there was a conflict of interest by the finance minister. The ethics counsellor is the individual responsible for clarifying whether in fact there is any conflict of interest, and he quite clearly this morning restated the fact that there was not.

Again, I want the committee to focus on the fact that the question as put by the ethics counsellor this morning is the question of the involvement of the minister in this particular piece of legislation. Quite clearly, as stated again by the ethics counsellor, there has been no involvement by the minister.

We had Mr. Farber here in front of us as the tax expert, and Mr. Loubier as well as other members put the tax questions to him. In fact, I asked a question about whether the organization as it appeared in Le Soleil was an organization that could take advantage of this particular provision. He said it was inconceivable that this corporation would be able to restructure itself in order just to take advantage of this particular provision.

Lastly, I guess I would call to the members' attention that the mandate of this Standing Committee on Finance is not to examine perceived or real conflict of interest, but to examine the provisions of Bill C-28. If the members want to pursue this elsewhere, they are certainly able to do that, but the mandate of this standing committee is to examine the provisions of Bill C-28. Mr. Chairman, I submit to you that that is in fact what this committee should do—continue its work in its analysis of Bill C-28.

The Chairman: Mr. Szabo, followed by Ms. Redman.

• 1055

Mr. Paul Szabo: Thank you, Mr. Chairman.

There seems to be a difference of opinion as to what constitutes a conflict. It appears that Mr. Riis, for instance, wants to pursue the issue of benefit. I would submit that whether or not the minister or the minister's company receives a benefit is not the question. In fact I would concede, and I think the minister would concede, that for any changes that benefit the tax system generally, probably you could find an example where there would be a benefit to one of his companies somewhere.

It's not wrong for any one of his companies to have a benefit, nor to lose. Those are the risks and that's why we play. The issue is conflict of interest.

Mr. Nelson Riis: Still.

Mr. Paul Szabo: The issue is still conflict of interest, and I don't believe it would assist the process to try to go and figure out whether or not we could find a possibility that there would be a benefit to any company that he may own directly, indirectly, or through any other mechanism. It does not prove conflict.

The issue was conflict of interest. We had the testimony. The recommendation was made.

With regard to the experience and expertise—and still there's this fishing expedition about hearing somebody who's an expert in that—that's one of the reasons I posed the question about what resources are available. The issue here is that Mr. Wilson did draw on the resources available to him to answer all issues relevant to the question of conflict of interest and made that determination.

To follow this further would be to suggest that we know or can get information that he did not have, and that's not apparent. I don't think there have been any holes or insufficient information identified in terms of making that assessment of conflict of interest. So I would suggest that some sort of subcommittee to continue a fishing expedition really is not productive for this committee.

The Chairman: Ms. Redman.

Mrs. Karen Redman: Thank you, Mr. Chair.

Along exactly the same line, I'm not quite sure what the intent of the subcommittee is. It seems to me we're couching two issues under one heading, and that's whether or not there's conflict of interest. I see no value in striking a subcommittee to get an answer we've already heard. It seems to me we're just going to keep asking the same question and hope that the answer is different, when it's quite clear that we have covered off the fact that there is no conflict of interest for the Minister of Finance.

The Chairman: Thank you, Ms. Redman.

Are there any further comments? Mr. Riis.

Mr. Nelson Riis: I have a point of clarification to the point that Paul raises. The reality is that Mr. Martin, whose company stands to gain by this legislation, introduced the bill himself.

Mr. Tony Valeri: That's incorrect.

Mr. Nelson Riis: Incorrect?

Mr. Tony Valeri: You're making the assertion that his company stands to gain. That's not been proven. In fact you have testimony from not only Mr. Farber, as I reiterated to you, but also the ethics counsellor, who's consulted with CSL, and they've clearly stated they are not in a position and are not considering taking advantage of any sort of provision. They would have to totally restructure their company to do so.

Mr. Nelson Riis: With all due respect, that's what they say.

Mr. Tony Valeri: Well, if I could give you another example, Mr. Riis, if in fact a government introduces legislation that benefits the tar sands, then again, is he going to restructure his company to take advantage of tar sands? Every time a policy is put in place by a government, it affects individuals. In fact if anything is done in this particular budget with respect to education—

Mr. Nelson Riis: I agree. I agree.

Mr. Tony Valeri: The issue is conflict of interest, and that's what Mr. Loubier is going for. I submit to you that there isn't.

Mr. Nelson Riis: Tony, you miss my point. We might be arguing a very technical point here, and I suspect we probably are. It would be nice to clarify this.

First of all, Mr. Wilson said that in this case only, the usual procedures were not followed. On page 7 he refers to the fact that in the past, when these kinds of potential conflicts arose, he was notified, and various appropriate avenues then were pursued. He said this did not take place in this instance.

This legislation was also introduced by the minister himself. It could have been introduced by any minister, but it was introduced by the minister himself, with what appears to be, what could be, an obvious benefit to his major holding company. And to seek this out, the conflict authority asks the company. What on earth are they going to say other than what they said—no, we have no intention. They actually qualified it, however, by saying that as currently structured we have no use for this. That may be the case, but it would be nice to hear from somebody who does not have a vested interest in this case—like a tax expert.

• 1100

Mr. Paul Szabo: But he has the resources available to—

Mr. Nelson Riis: But he didn't pursue that. He admitted it himself.

Mr. Paul Szabo: That's not established. You didn't ask the question—in addition to calling the company, did you do anything else?

Mr. Nelson Riis: I put the question to him, and he said no, he did not seek any outside advice on it.

Mr. Paul Szabo: Did he ask his officials whether they felt this was something they had to do in-depth, or did they give an opinion? The question about whether the tax experts available to him gave an opinion as to whether further analysis was necessary was not established.

Mr. Nelson Riis: Mr. Chairman, we can debate this, and I guess we will. It probably will be defeated, and fair enough. But think of Mr. Martin himself. Here's an individual who has aspirations politically, I assume. Do you think the opposition is just going to walk out of here and say okay, we've dealt with this, thank you and that'll be it? This is going to hang over this individual for a long time—an apparent conflict of interest. Even the ethics person says there's no real conflict, but what is it—there is a conflict, but not a real one? We're arguing technicalities here. Do you think the Minister of Finance wants this to continue raising the questions we apparently have here, and seeking alternate views from experts the ethics counsellor apparently did not pursue and so on? For Mr. Martin's sake, ought we not clear this up once and for all?

The Chairman: What we're really discussing here is establishing a subcommittee, and I think that should come into play once in a while, as we debate the issue.

Mr. Nelson Riis: Okay, forget the.... I'll leave it at that.

The Chairman: Mr. Solberg.

Mr. Monte Solberg: Thank you, Mr. Chairman.

Let me tell you why I think we should have a subcommittee. As the ethics counsellor pointed out, he himself went to ask them whether there was going to be any benefit. Obviously he thought it was germane. He thought it was important to do that. So in his opinion this was something that was central to the point of conflict of interest. If he thought it was important, doesn't it make sense for us to find a third party who's independent?

And we did ask him, Paul. We did ask him whether he had done that, and he said no. Doesn't it make sense to call somebody like that before a subcommittee to establish whether there is a potential for CSL to benefit? Obviously he thought it was an important enough question that he asked it. He went to CSL to ask them whether they were going to benefit. For whatever reason, he thought it could be part of a conflict of interest. That's the first point I'd make.

Second, we need to remember that because of the way the ethics watchdog's office is structured, this person is not somebody who serves Parliament, he serves the Prime Minister. I note that in section 24 of the conflict of interest guidelines, if there's a disagreement between an office holder and the ethics counsellor, it's the Prime Minister who settles the disagreement. So I would argue that in a sense the ethics watchdog has a conflict of interest himself. I think the only way to get beyond that is to allow opposition parties to be involved in a subcommittee so that we can establish, outside of this closed political sphere, whether there is a conflict of interest.

The Chairman: You had a good start there when you tried to answer the question, but after that you ran into things that I don't think we're going to get into—trying to figure out whether the ethics counsellor himself is in a conflict of interest.

Mr. Monte Solberg: Mr. Chairman, I think we're masters of our own fate on this committee. If it makes sense—

The Chairman: Always within reason, though. Always within reason.

Mr. Loubier.

[Translation]

Mr. Yvan Loubier: To support what Mr. Solberg said this morning and last week as well, we asked some questions which were answered, but they were not answered in full.

• 1105

On page 6 of his text, the ethics counsellor—and this is for Mr. Valeri who does not know how to read—said that Mr. Martin "sponsored this bill". "Sponsored" is translated by "parrainé" in French.

Mr. Wilson himself acknowledged that he was not fully qualified to assess the direct or indirect impact of the amendments to the Income Tax Act on CSL or its affiliates.

So certain questions regarding tax planning arise, which Mr. Len Farber answered in part last week. His answers proved we were right. However, it would be better to have more detailed answers.

There is also another type of witness I would like to call before the committee. I'm thinking of an ethics specialist, but someone from the outside. There are university professors who study ethics, who could perhaps give a more objective evaluation than Mr. Wilson has of what constitutes an apparent conflict of interest, or real or potential conflicts of interest.

This morning, Mr. Wilson said there was an apparent conflict of interest. You should read that carefully, Mr. Valeri, because that comment raises some problems. I think our texts are different. And yet I'm reading the English version, and it matches the French version exactly. Mr. Wilson said that there was an apparent conflict of interest.

All these questions require that we set up a sub-committee. In the past, we have established sub-committees to study issues that were much less important than the one before us at the moment.

[English]

The Chairman: Mr. Valeri and then Mr. Pillitteri.

Mr. Tony Valeri: Thank you, Mr. Chairman.

Unlike yourself, Mr. Loubier, I do have respect for my colleagues. I would suggest that when you address or make comments about a fellow colleague, you refrain from getting personal. I could go on and say that your going on this particular expedition is nothing but a witch hunt, but I tend to stay with the facts.

What the ethics commissioner said this morning was that some members made an allegation of an appearance of conflict. He was certainly making reference to yourself when he made that comment, so I would urge you to listen very carefully and to stick with the facts.

I would make the point, as I did earlier, that the mandate of the Standing Committee on Finance is not to examine perceived or real conflicts of interest. We are on this committee to deal with legislation, and the legislation before us is Bill C-28. Bill C-28 does not in any way, from a technical perspective, deal with conflict of interest. That can be dealt with elsewhere, but certainly not in this committee.

An individual came before us this morning as an ethics commissioner. Mr. Solberg commented that we know who this particular commissioner is responsible to. I would remind Mr. Solberg that under our parliamentary system the Prime Minister of Canada is ultimately responsible to Parliament, so it all comes back to Parliament.

Thank you, Mr. Chairman.

The Chairman: Mr. Pillitteri.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you, Mr. Chairman.

I want to put in a lighter note this morning and get on the record that it's strictly politics. I would be supporting this subcommittee except that if we were to get together and were to use my wine, I'm sure there would be some conflict of interest. I'm pretty sure I would be in a conflict of interest, so I would not want to pursue it more than it is pursued at this table. Simply put, for political matters or political reasons they will try anything possible. If we were to follow their initiative as parliamentarians, we could have a bunch of rum dogs sitting around this table representing the people of Canada, not anyone who has the capacity to think or build something for themselves, Mr. Chairman.

I think that's a fair comment and that's what I think the opposition would want us to do. I don't think I could support anything like that.

Thank you.

The Chairman: Earlier on I missed Ms. Torsney, so I will go to her first.

Ms. Paddy Torsney (Burlington, Lib.): Thank you.

I think the record should show that Mr. Loubier was trying to get a bottle of wine from Mr. Pillitteri. I'm not sure what a rum dog is, but I want to make three points about the forming of the subcommittee.

If you look at page two of the ethics commissioner's presentation, it's very clear that these are technical changes. They are not substantive changes to the Income Tax Act. And if you look at it further, the proponents of this came to the government in 1990, and they were another organization completely. They were not Canada Steamship Lines; they were a Vancouver-based group. And the changes were made by another government, so the minister is completely out of the loop in that one. So clause 241 is in fact a technical amendment.

• 1110

Second, if you look at whether there is an issue of conflict, the ethics commissioner has been very clear. The last sentence of the second paragraph on page eight says “there is no substance to the allegations”—the allegations of Mr. Loubier—“Mr. Martin has not been in a conflict of interest”. So it is clear that we don't need a special subcommittee to decide that, because we've already dealt with it in the main committee.

Finally, on the third issue, whether there needs to be a subcommittee, and it should be a subcommittee of this committee—it's the wrong committee. If you're going to ask about the workings of the office of the ethics commissioner, bring it before the procedure and house affairs committee or some other committee. It's not the finance committee. This is the committee that deals with the technicalities of the bills that are before us.

Mr. Monte Solberg: There are no ethics subcommittees—let's make that very clear.

The Chairman: Mr. Loubier.

[Translation]

Mr. Yvan Loubier: I see no point in continuing the discussion. It is clear that you do not intend to create a sub-committee.

I would just ask that you confirm to us in writing this week the fact that you, the chairman of the finance committee, after discussing the matter with all committee members, refused to set up a sub-committee. There is no point in going on and on about this. We can clearly see the approach you're taking. We're not crazy, after all. So, give us an answer in writing this week saying that you refuse to set up a sub-committee. And that will be it, we will have settled the matter.

[English]

The Chairman: Mr. Loubier, if you want a subcommittee struck you'll have to make a motion to that effect.

[Translation]

Mr. Yvan Loubier: All right, fine. The letter I tabled in French and English, signed by my three colleagues—

[English]

The Chairman: If you were to move a formal motion, a vote would be taken and that will be the answer to your question.

[Translation]

Mr. Yvan Loubier: We, the four opposition parties, ask that a special sub-committee of the Standing Committee on Finance be set up as soon as possible to clarify the situation regarding the interpretation of clause 241 of Bill C-28. This provision concerns international marine transportation and was sponsored by the Minister of Finance, who has certain interests in this industry. We therefore think is essential that the possibility of an apparent or real conflict of interest be clarified fully. In addition, the committee should have the power to invite all witnesses who could help the finance committee review this matter, such as tax experts and people who work in marine transportation.

That is the main point of the motion, which is the same as that contained in the letter signed by representatives of the four opposition parties. I hereby table the motion.

However, it is not enough merely to vote on a motion. I want a written answer from you to this request, and I want it this week, because the letter was sent to you.

[English]

The Chairman: You'll get your answer.

Do you want a recorded vote on this?

[Translation]

An honourable member: We want an answer in writing.

Mr. Yvan Loubier: Yes.

[English]

(Motion negatived: nays 8; yeas 5)

The Chairman: Mr. Loubier.

[Translation]

Mr. Yvan Loubier: As I mentioned, Mr. Chairman, the motion we tabled is taken from the letter we sent you. I, together with my colleagues, expect a reply in writing from you today stating that as chairman of the committee, you refuse to establish a sub- committee of the Finance Committee to analyze clause 241.

[English]

The Chairman: Mr. Loubier—

[Translation]

An honourable member: Yes! That is why we wrote a letter.

[English]

The Chairman: —I understand that you like receiving letters from me, but the reality is this: I can write a letter to you, directing you to read the result of this vote as a statement of the willingness of the committee not to strike a subcommittee. That would be the letter, if that's the letter you want.

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[Translation]

Mr. Yvan Loubier: Exactly, exactly.

[English]

The Chairman: As you know, I'm in the hands of this group.

Mr. Yvan Loubier: It's what I want.

The Chairman: Okay.

Mr. Yvan Loubier: Thank you, sir.

The Chairman: Take care. Have a wonderful day.

The meeting is adjourned.