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Results: 1 - 15 of 850
View Cathy McLeod Profile
CPC (BC)
Thank you, Mr. Chair.
Thank you to our witnesses today.
Through the chair, I want to assure Mr. Rankin that the media is not always accurate, and the suggestion that we are resisting efforts to combat tax evasion is completely false. We certainly do support Prime Minister Cameron's efforts to achieve a consensus in the G-8 on tax havens and tax evasion.
It would be absolutely absurd to think that there would be any approach that we would take as a country other than to work very hard on this issue. Certainly, our history and our work globally speak to our commitment to move forward and deal with this issue.
I just wanted to make that as a general comment, because it is a very important issue.
I think the bottom line is that today we recognize that this tool is not the be-all and end-all to tax evasion use of offshore tax havens. Would you describe it—just a quick yes or no—as a tool in the tool box?
Brigitte Alepin
View Brigitte Alepin Profile
Brigitte Alepin
2013-06-17 11:49
Good morning. Thank you for the invitation. It's a privilege to be here today to talk about the merits of Bill S-17.
I do not support Bill S-17 because it represents an additional step toward the implementation of a global tax system where wealthy corporations or individuals can legally benefit from tax havens and avoid paying their fair share of taxes.
With the support of tax-optimization strategies, the Canada-Hong Kong tax treaty, for example, which Bill S-17 refers to, enables the legalization of a partially or totally tax-free corridor between Canada and a number of Asian countries.
This tax privilege does not come under the specific sections of the treaty, but relates to the simple fact that the Canadian tax system doesn't tax income from subsidiaries of Canadian multinationals in countries with which Canada has signed a tax treaty or an agreement to exchange tax information.
Given that the corporate tax rate is 16.5% in Hong Kong and about 25% in Canada, the Canada-Hong Kong treaty does more than avoid double taxation. It provides a 40% savings to Canadian multinationals that will export revenue to Hong Kong.
In addition, tax plans are already being developed to legally increase this 40% tax savings to a total tax exemption.
In a recent special report presented by Tax Analysts, an international think tank intended mainly for tax practitioners, the renowned Montreal tax specialist, Nathan Boidman, explains that revenue made in Hong Kong could be 100% exempt from Canadian and foreign taxation when subsidiaries set up in Hong Kong collect interest income, earnings gained from licensing or when corporate structures set up in Asia include a number of jurisdictions and where the revenue only passes through Hong Kong.
Thousands of tax agreements similar to the Canada-Hong Kong treaty currently exist between countries, so much so that they are being manipulated strategically. It is now legal for the world's wealthy corporations to pay 2% tax, if not no tax.
To compensate for the erosion of the tax base caused by this tax exemption for revenue exported legally to tax havens or jurisdictions that are taxed less, other taxpayers, the workers, the SMEs, major corporations here, all these immobile taxpayers are the ones who have to pay. And if they try to partially or totally avoid paying Canadian tax by using tax havens, like the wealthy corporations or individuals do, it is considered illegal for them. Moreover, as indicated in the various provisions of Bill  S-17 relating to the exchange of information, the Canadian government is serious about its mission to corner those offenders.
I do not support Bill  S-17. However, I wonder if the effort made to implement these bills or even to contest them is the optimal way of stopping the implementation of this preferential tax treatment reserved for the wealthy. I might invest as much of our limited resources as possible in trying to replace international tax competition, which is the very essence of our current global problem, with some tax co-operation.
Thank you for your attention. I would be happy to answer any questions you may have.
Dennis Howlett
View Dennis Howlett Profile
Dennis Howlett
2013-06-17 11:58
Thank you for the opportunity to share my views on Bill S-17.
The tax conventions and agreements included in Bill S-17 will be of very limited use in improving the recovery of taxes from those hiding their money in tax havens unless some key elements of the tax havens action plan proposed by British Prime Minister David Cameron at the G-8 summit are implemented. If Canada is serious about going after tax cheats who are using tax havens, then it should demonstrate this by fully supporting Prime Minister Cameron's action plan without trying to water down some of its key components.
In particular, the British proposals on beneficial ownership in multilateral automatic tax information exchanges are key to whether Bill S-17 will be a useful piece of legislation or a waste of time and effort.
Let me explain what I mean.
One of the problems with the tax conventions and agreements covered by Bill S-17 is that Canada needs to have quite a bit of information to begin with before it can request information under the current OECD bilateral agreement model that these agreements are based on, and we can clearly see this. If you look at the details in schedule 5 of Bill S-17, for example, you see all the steps that have to be taken in the case of Luxembourg to get the information Canada wants. It spells out quite clearly all the complicated steps involved.
It's similar to what the police have to go through to get a search warrant. As I'm sure Ms. Glover would be able to confirm from her experience, police have to have identified a suspect, and they need a fair bit of evidence in order to convince a judge to grant a search warrant.The challenge facing Canada Revenue Agency at the moment is that they have a very difficult time figuring out who their suspects might be and who they should be asking tax haven governments for more information on because of the banking secrecy that prevails in tax haven countries. How can Canada ask for information on a suspected tax evader if strict beneficial ownership rules are not applied? A tax evader can open trust accounts or set up shell companies in many tax havens without having to establish the ultimate beneficial owner. Without strong beneficial ownership rules in force, it's easy to hide your wealth offshore, and this facilitates not only tax evasion but also organized crime's money laundering, arms dealing, and financing of terrorism.
I am sure this government would not want to be accused of supporting such things.
The British G-8 tax haven action plan proposal on beneficial ownership calls for a public registry as well as much stronger rules to ensure the ultimate beneficial owner of any account. It's essential that beneficial ownership information be available in the public domain as opposed to being accessible only to police or tax authorities, because if it is available publicly it will be much easier for all countries to get access to this information. Multilateral automatic tax information exchange is the other key measure needed to make bilateral tax information exchange agreements useful. Proposals now under consideration at the G-8, G-20, and OECD would facilitate the exchange of basic information on account holders so that Canadian tax authorities would know when a taxpayer has not indicated on his or her tax return an offshore account in country X or Y, and then they would know who to go after, in terms of further investigation.
I know that the Canada Revenue Agency has come under a lot of criticism recently, including from our groups, but I actually have some sympathy for them given what they are up against. It's extremely difficult to undertake investigations on those who might be cheating on taxes using tax havens when they have very little to work with.
My final point is that there's a need to augment the capacity of the Canada Revenue Agency, especially given the recent leak of data that's now available to the Canadian government. The six or 10 additional people reported to have been assigned to a special unit will not be adequate to go through all the tax-leak data.
The CBC and the International Consortium of Investigative Journalists need to be commended for doing a major public service by exposing those who are using tax havens. It's imperative that Canada has the capacity to effectively follow up on that information.
Thank you.
Alain Deneault
View Alain Deneault Profile
Alain Deneault
2013-06-17 12:11
Thank you, Mr. Chair.
Before I start, I would like to say something to the technicians. I am getting the simultaneous interpretation in English whenever people speak French. I do not need it and, moreover, I hear it when I am speaking. Please do not provide me with the simultaneous interpretation in either English or French.
Ladies and gentlemen, thank you for your invitation.
I would like to remind you that, internationally, mainly in the West but not exclusively, we are seeing an increased awareness of the importance of fighting not only against tax fraud, but also against the effects of tax havens, those states that make legal access possible. The people, some researchers and civic organizations are well aware of it. The OECD has established standards for action for its member countries, including Canada. Those measures are timid of course and often very unsatisfactory, but they still encourage public awareness and political awareness. We can congratulate ourselves for these advances and highlight the contributions of all the people of good will who participated.
That said, the measures proposed in the bill being studied today as part of the tax information exchange agreement with Canada are clearly ineffective. The OECD model, which Canada uses, is very often inoperative. The Swiss ambassador to Canada explains in his statement, which is included in the bill, that the request for information submitted by a Canadian officer to Switzerland under this agreement would be subject to a very heavy interpretative protocol. And I quote the ambassador: “...these are important procedural requirements that are intended to ensure that fishing expeditions do not occur,...”.
This is as much as saying that a tax haven like Switzerland will lift bank secrecy only if you have the information you want to begin with. In other words, it has to be a case like that of the former French budget minister Jérôme Cahuzac, where the Swiss authorities confirmed that he had an account in Switzerland only when everyone already knew about it. In other words, bank secrecy is lifted only when people already have the information, the way it was with Jérôme Cahuzac. So we are in the same place we were in 2004, a situation criticized by the French parliamentarian Vincent Peillon. He said the: “This type of logic does not allow us to provide assistance until the evidence is already in the hands of investigators”. We are therefore a long way from the automatic exchange of information required to really put an end to bank secrecy.
Furthermore, the tax agreement between Canada and Hong Kong seems problematic. It does not deal just with personal income but also corporate income. Article 5 of the agreement specifies that only Canadian companies that have real economic activity in Hong Kong are included in this category. This ensures that there is no tax on income that has already been taxed in Hong Kong, such as when a Canadian subsidiary transfers its revenue to Canada.
However, considering that many companies in the West are in Hong Kong to take advantage of the low taxes and low salaries there, the convention will enable Canadian companies that have industrial operations in Hong Kong, paying only the minimum taxes, to transfer the revenue from their activities to Canada without paying taxes on it. Politically speaking, it comes down to Canada recognizing Hong Kong as a tariff-free zone, allowing the relocation of companies and hurting workers around the world. Rather than a strictly administrative measure, we are seeing a symbolic display of strong political support.
In terms of the tax information exchange with Hong Kong, Canada does not have the tools to do what it wants. According to the law, in very specific cases, it can only obtain information that the Hong Kong government already has. Let me quickly cite the convention:
3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation:(b) to supply information which is not obtainable under the laws...
In other words, the law states that Hong Kong will give information only if it has that information and is able to obtain it. But Hong Kong's trust law is laid out in such a way that the government does not have any information on the activities of the trusts or the real beneficiaries.
Let me read you a reference that explains the way trusts work in Hong Kong:
Documents do not have to be registered and there are no statutory requirements in Hong Kong for a trust to make annual returns, submit audited financial statements, etc., unless it is carrying on business in Hong Kong.
In other words, the position of the Hong Kong administration does not recognize who the beneficiaries of the trusts created there are. As a result, it never provides any information we may request.
Today, it is recognized that there are extensive consultations in favour of the automatic exchange of information. We can hope that a mechanism like that will lead to international standards that will encourage the principle of neutrality among international tax authorities.
Thank you. I look forward to your questions.
View Raymond Côté Profile
NDP (QC)
Thank you, Mr. Chair.
I want to thank the witnesses for their willingness to answer our questions.
While I was listening to your presentations, I could not help but think back to a joke made by a security expert several years ago. He was showing me a Frost fence around a company, and said that this was the best way to prevent honest people from illegally entering the premises. I thought that was an excellent commentary, as the fence was also a measure that applied to people who did not have the means to circumvent it. That is the case of my mother, who has only her basic retirement income. It is another story for much wealthier people.
My question is for you, Mr. Howlett. I will come back to shell companies and the situation I started talking about.
The Australian authors of the study asked 3,700 intermediaries, in 182 countries, to create a shell company to facilitate the process. I am proud of being Canadian, but certain situations may have a negative effect on our pride. In Canada, the average number of attempts needed to establish a shell company, which is practically impossible to trace, was under 5—it is apparently 4—while the number of attempts necessary for access to tax havens was 25 on average.
Clearly, international pressure—and more specifically the pressure exerted by developed countries—has resulted in tax havens being more accountable than Canada.
Would you like to comment on that data as it relates to our study?
Dennis Howlett
View Dennis Howlett Profile
Dennis Howlett
2013-06-17 12:53
When I had information from reliable sources in the U.K. about Canada's objection to the proposed beneficial ownership rules under the G-8, I was scratching my head in trying to figure out why this could be.
One of the possible reasons is that some of the practices in some jurisdictions in Canada may not come up to the proposed new international standard of really ensuring that the ultimate beneficial owner is clear when registering companies. Also, in our system you can register a company federally, but also provincially. The federal government may not want to undertake what it can't deliver in terms of provincial jurisdictions.
However, as I understand it, some of the pressure on the federal government, which was actually credited in budget 2013, comes from provincial governments that want the federal government to do more in terms of going after tax havens. I would think that if there is need for some reform in this regard in Canada, provincial governments would be willing to do this because they stand to benefit as well from additional tax revenue that may be generated from stronger international rules around beneficial ownership.
So I'm hoping, and the latest information I'm getting from the U.S. is that Canada maybe has moved somewhat on this issue. If that is the case, and we'll find out tomorrow, I would be very pleased to hear that, if the Canadian government in fact is going to support the proposed G-8 action plan.
View Murray Rankin Profile
NDP (BC)
View Murray Rankin Profile
2013-06-17 13:04
Thank you, Mr. Chair.
I think I'd like to ask Mr. Howlett a question first, and perhaps invite Mr. Deneault to respond, if he would.
I'd like to explore the relationship, as you did, between Bill S-17 and these double-taxation treaties and shell companies, and therefore beneficial ownership. You spoke a little bit about that, about the use of setting up shell companies and tax havens without knowing who the beneficial owners are of the shares of those companies. In a sense, my question is this: is there anything in these double-taxation treaties to address the problem of shell companies that you identified?
Dennis Howlett
View Dennis Howlett Profile
Dennis Howlett
2013-06-17 13:05
No, not in my examination, but my point is that unless you have better rules globally on beneficial ownership, then none of this will be of any use at all, because if you can't establish clearly where the ultimate owner of a shell company or a trust account or any other instrument resides, then whom do you share that information with in another jurisdiction? If you can't establish clear rules on beneficial ownership, then everything else won't work.
The fact is that in many countries there is secrecy. With banking secrecy, it's possible to register companies without the local authorities really doing to any due diligence to establish who the ultimate owner is. As long as that kind of situation is allowed to prevail, then we're never going to be able to have.... Even automatic information exchange won't work, let alone these bilateral treaties, if you don't have that clearly fixed.
We have a problem, and it has to be fixed. The G-8 offers one of the best opportunities yet to get some momentum going forward to fix that problem. I'm hoping that Canada is going to support those efforts.
Alain Deneault
View Alain Deneault Profile
Alain Deneault
2013-06-17 13:06
Exactly.
My answer is in the same vein. Tax information exchange agreements stipulate that information is disclosed only if it is collected. If you read the legislation on trust creation in Hong Kong, you will realize that we will not be getting any information under that agreement because Hong Kong does not collect it. In terms of politics, the message Canada is sending is very bad because the international community is currently trying to establish a balance of power with tax havens to force them to make some basic progress in the area of access to information and tax leaks.
This bill gives us the impression that we have some tools, when the tool box is actually empty. So we have entered the realm of illusion and hoaxes. It would really be better to have nothing at all, instead of having an illusion of a tool box, as is currently the case with Bill S-17 when it comes to Hong Kong.
View Murray Rankin Profile
NDP (BC)
View Murray Rankin Profile
2013-06-17 13:08
I note that in the current issue of National, the journal of the Canadian Bar Association, there is an article on shell companies by Marc-André Séguin. He says that Canada is one of the “two most lax jurisdictions in the world when it comes to the rules for preventing the incorporation of anonymous shell companies”.
As a consequence, Mr. Howlett, if that is accurate, how does that factor into your analysis?
Dennis Howlett
View Dennis Howlett Profile
Dennis Howlett
2013-06-17 13:08
This is fairly recent research that has been done, and I think it does point out what should be of concern to all of us.
This is of concern, as I pointed out before, not only for tax evasion but also for money laundering, organized crime, financing terrorism, and so on. Even if the Canadian government has tightened up, in the recent budget, the reporting requirements of financial institutions—which is a step forward, and I support that—this new research points out that there are other glaring areas that need to be addressed if we're going to get a handle on this situation.
It's difficult, though, for one country to just set up its own system. What is preferable is a multilateral agreement about a new international global standard on beneficial ownership to tighten up on the rules of corporate registration and prevent shell companies, or trusts where it's not clear who the ultimate owner is.
I think what is being proposed at the G-8, which obviously is going to need to be followed up, is the route forward on addressing this problem.
View Shelly Glover Profile
CPC (MB)
Thank you, Mr. Chair.
We've talked an awful lot outside the scope of Bill S-17. Mr. Howlett has in particular.
You continue to talk about G-8, Mr. Howlett, and you speculate as to what may or may not occur. I always enjoy listening to you. I particularly enjoy when you make reference to my policing background, as you did with regard to search warrants. But one thing I might say is that when we receive information that leads to a search warrant, it's not obviously public, but it is recorded information, as far as informants go.
So as you sit here today and refer to, you know, “I've heard people in the U.S. say”, or “I've heard other countries say this about what Canada's proposing to do at G-8”, I take issue with it, because you haven't divulged who said this.
To be very frank with you, it's somewhat selective listening, so I'd like you to hear once again what the Prime Minister himself said about the G-8, which you haven't referenced. You have referenced people you haven't identified, but here in fact is what the Prime Minister of Canada said just yesterday.
The question by the reporter was about the fact that combatting international tax evasion would be one of the main themes discussed at the G-8 summit, with two key issues: the public registry on beneficial ownership and the automatic tax information-sharing agreements. The reporter asked the Prime Minister to give his thoughts or reservations, if any, on either of these two particular issues.
Here's what the Right Hon. Stephen Harper had to say about those two things, which you've talked about at great length here today, sir, without ever referencing this.
Here's what he said, and of course I'm reading from the transcript:
We’re very supportive of all three Ts of Prime Minister Cameron’s agenda.
The three Ts, of course, as everyone knows, are tax, trade, and transparency.
He goes on to say:
You know, tax evasion, there’s no upside to tax evasion. It’s bad policy, it’s bad politics, and governments lose revenue that governments should be getting.
He continued that we obviously believe in low tax rates in Canada, but that people need to pay the tax rates that we actually have. He added:
The only reservation we will obviously express is that in terms of implementation in Canada, we’re going to have to consult with our provinces because we are a federal state and they have taxation powers.
....It is important that we do it and that we do it together because when we’re dealing with tax evasion, we’re dealing with problems that cross borders. Even the most powerful governments of the world can’t deal with these things by themselves so I look forward to being part of the declaration and to making progress on this as we leave the summit.
I hear Mr. Rankin asking whether or not I have a question for him.
My intervention is basically to correct the record, sir, because you have mentioned absolutely nothing about what the Prime Minister of Canada has said. He has clearly said he intends to address the things that you question whether or not he intends to address.
So I think it's beneficial for Canadians to hear exactly what the Prime Minister of Canada has said, and to ask you, sir, to please divulge who these informants are that you continue to say have said he will not address it.
Dennis Howlett
View Dennis Howlett Profile
Dennis Howlett
2013-06-17 13:13
I did earlier acknowledge that I heard that there seems to be some movement forward from Canadians' position—
View Murray Rankin Profile
NDP (BC)
View Murray Rankin Profile
2013-04-23 9:39
Thank you, Mr. Chair.
Thank you both for attending this morning.
I'm going to take you to a different place, if I may: the world of tax havens.
Governor Carney, you recently said that tax havens hurt the integrity of the global financial system and diminish the effectiveness of domestic fiscal policy.
Considering your experience on the Financial Stability Board in bringing non-cooperative jurisdictions into the fold, can you tell us what you consider to be the most effective instruments for contending with these jurisdictions? What are the best practices, or perhaps successful but under-studied measures, that the finance committee should know about?
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