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View James Rajotte Profile
CPC (AB)
I call to order meeting number 129 of the Standing Committee on Finance.
Our orders of the day, pursuant to the order of reference of Monday, June 10, 2013, are for the study of Bill S-17, An Act to implement conventions, protocols, agreements and a supplementary convention, concluded between Canada and Namibia, Serbia, Poland, Hong Kong, Luxembourg and Switzerland, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes.
Colleagues, I want to thank all of you for being here on very short notice. I sincerely appreciate it.
I also want to thank our guests, both here in Ottawa and by video conference, for appearing on very short notice. It is very much appreciated by our committee.
We have a three-hour meeting scheduled, from 11 till 2, and we are going to hear from officials from the Department of Finance first. Then we will have questions from committee members. I expect this will take 30 minutes minimum, or maybe a little longer. Then we will ask our witnesses to come forward and present their opening statements, and then we'll have questions from members.
At the time when members want to go to clause-by-clause consideration of the bill, they will indicate that to me, and we will do that.
For the other witnesses who are here with us and by video conference, you'll be able to hear the officials from the Department of Finance present their rationale for this bill as well.
First of all, from the Department of Finance, we have Mr. Ted Cook, who has been before our committee many times recently.
Welcome back to the committee, Mr. Cook.
We also have Monsieur Alain Castonguay.
Welcome to the committee.
Mr. Castonguay, I believe you have the opening statement for the officials. Then we'll have questions from members.
Please begin.
View Ted Hsu Profile
Lib. (ON)
Okay.
I understand that the idea of multilateral automatic information exchange came up during this committee's study on tax havens. I'm wondering if Canada's taking any steps towards moving in that direction.
Alain Castonguay
View Alain Castonguay Profile
Alain Castonguay
2013-06-17 11:23
I can tell you that the OECD has started to do work on this. As an OECD member, we're very interested in that. They're examining the design issues around multilateral automatic exchanges of information. That work is just getting started, and we'll participate in it.
View Ted Hsu Profile
Lib. (ON)
Maybe I could just quickly go around to all of the witnesses and ask if they agree—
An hon. member: That's brief?
Voices: Oh, oh!
Mr. Ted Hsu: Well.... Does anybody object to saying that multilateral automatic information exchange and beneficial ownership disclosure should be priorities?
H. David Rosenbloom
View H. David Rosenbloom Profile
H. David Rosenbloom
2013-06-17 12:34
Yes. The United States has automatic information exchange with many countries. In fact, that's the rule in the United States. I don't know that it is.... Automatic information exchange, as far as I understand, basically involves your turning over the information you collect to the other country on an automatic basis. It's fairly easy for a taxpayer who wants to avoid being identified to invest through some blocker entity between the taxpayer and the account. It's relative child's play to get around automatic information exchange.
I don't believe, in our experience, that it has done anything. Look at what we're going through right now. We're trying to identify offshore accounts. We've passed this Foreign Account Tax Compliance Act, which is a subject that nobody has mentioned here but is very important to this discussion. That's going to do a lot more than automatic information exchange ever did, and we've had automatic information exchange for 40 years. It's not an answer, as far as I'm concerned.
View Guy Caron Profile
NDP (QC)
Thank you.
I will turn to Mr. Cockfield again.
You heard me quoting The Economist, which said the following about companies:
“A confusing thicket of bilateral tax treaties lets them play off national rules against each other.”
I think all the comments we have heard, particularly in the study on tax havens, have clearly shown that efforts should really be directed towards multilateral treaties to ensure that all the countries can work on having the same rules, perhaps even with the assistance of an international organization. To do so, we could perhaps follow the WTO model to some extent.
Do you think we should spend less time negotiating all the bilateral agreements and more time reaching an international consensus that would allow those countries to start with a level playing field?
I will also let Ms. Alepin answer quickly.
Arthur Cockfield
View Arthur Cockfield Profile
Arthur Cockfield
2013-06-17 12:44
I agree that multilateral action and greater cooperation at the international level would certainly be helpful.
In the research community there have been ongoing discussions for the last two decades about how to pull this off. Currently, Canada has signed the OECD Convention on Mutual Administrative Assistance. The last time I checked, six months ago, we had yet to ratify it. Strangely it's been almost a decade or at least eight years since we signed that. That also might be a step in the right direction.
I'm a little cynical as to whether we'll see this international cooperation. I believe the OECD is moving in the correct direction. It's not truly a world tax organization. It represents the interests of the OECD member states, but it has ongoing efforts of outreach to non-OECD member states. Again, from a theoretical research perspective, we can absolutely fix this problem. But—boy—it's a complicated one and I'm not sure there's the political desire to do so. There are a lot of wealthy people, for instance, who wouldn't want total transparency within the global system.
Brigitte Alepin
View Brigitte Alepin Profile
Brigitte Alepin
2013-06-17 12:45
In 2005, I had a research contract for Harvard University. The objective was to determine how to adapt our tax regimes to globalization. All those issues, which are current problems, were not very well known at the time. This research contract led me to conclude that we must slowly work towards global tax co-operation. That will probably be the only way to replace this tax competition between countries, which is at the very root of the problem.
Alan H. Kessel
View Alan H. Kessel Profile
Alan H. Kessel
2013-06-11 11:05
Thank you.
Honourable members, Mr. Chair, it's my pleasure to be here with you today to discuss legislative amendments to the Corruption of Foreign Public Officials Act, CFPOA.
Since its introduction on February 5, Bill S-14 has progressed quickly and has received widespread support from both parliamentarians and stakeholders. It's our hope that members of this committee, and indeed all parties, will recognize its importance and move expeditiously to ensure that Bill S-14 is enacted as soon as possible.
Canada has long played a prominent role on the international stage in combatting corruption, and it takes allegations of corruption involving Canadian companies seriously. We have seen an increasing amount of international attention being paid to global corruption, and indeed the Canadian media have taken note of a number of recent high-profile cases in our courts.
The global fight against foreign bribery is intended to create a level playing field for international business so that Canadian companies can compete and win fairly in the pursuit of freer markets and expanded global trade. Canada has been an active partner and has played a prominent role in international efforts to combat corruption and bribery. The CFPOA was first introduced to implement our international obligations under the Organization for Economic Cooperation and Development anti-bribery convention, as well as two more anti-corruption conventions through the OAS and the UN.
Needless to say, Canada takes its international obligations extremely seriously, and we are pleased that at its meeting in March 2013, the OECD working group on bribery praised the government for its amendments as measures that will implement the working group's recommendations to a very high degree, if passed as tabled within one year of tabling.
Mr. Chair, Bill S-14 signals our government's continued commitments to further deter and prevent Canadian companies from bribing foreign public officials in international business transactions. These are important amendments that will strengthen our anti-corruption laws and place Canada at the leading edge of countries taking strong action against corruption, action that will benefit Canadian companies both at home and abroad. These amendments will help ensure that Canadian companies continue to act in good faith. With this bill, Canada is sending a loud and clear signal to the world that we will not tolerate corruption.
I'll now take a minute to briefly explain the six technical amendments that are being proposed in Bill S-14.
First is the introduction of nationality jurisdiction to allow Canada to prosecute Canadians or Canadian companies on the basis of their nationality. Currently we can only do so after proving a substantial link between the offence and Canada.
Second, provide the RCMP with exclusive authority to lay charges under the act.
Third, remove the for-profit requirement so that bribery applies to all bribes and not just those paid by businesses that make a profit.
Fourth, increase the maximum imprisonment from five years to 14 years.
Fifth, introduce a new books and records offence specific to foreign bribery. Although there are already offences under the Criminal Code that criminalize falsification of books and records, they are not specific to foreign bribery. The penalties for the new offence would mirror those for the foreign bribery offence, that is, a maximum of 14 years' imprisonment and unlimited fines.
Finally, eliminate the facilitation payments exception under the CFPOA. You will note that the bill provides for a delay for the coming into force of the elimination of the facilitation payment defense. This delay will provide Canadian companies time to adjust their own practices and internal policies, if they have not already done so, to ban the use of facilitation payments in their day-to-day operations.
Honourable members, Mr. Chair, as I previously stated, the proposed changes have given Canada tentatively good marks with domestic stakeholders and at the OECD working group on bribery. We are pleased with the OECD working group on bribery's strong, positive endorsement of the significant progress made on investigations and prosecutions of the foreign bribery offence, the awareness-raising efforts undertaken by numerous government departments, and the proposed amendments to the CFPOA included in Bill S-14. It's important to note that these positive comments from the OECD working group on bribery were given with the strong caveat that the proposed amendments be adopted. Canada has invested a lot of credibility in getting this bill tabled, and we must report back to the OECD in the near future regarding its adoption.
Honourable members, Mr. Chair, Canada is positioning itself as a reliable supplier of the resources that emerging markets need to grow. We must create the conditions for Canadian businesses to succeed in the pursuit of its pro-trade agenda. Corruption does the opposite. It hinders economic growth and long-term prosperity. It fosters only an environment conducive to allowing other crimes to flourish. We expect our companies to abide by the laws of the countries they operate in, as well as to act in accordance with applicable Canadian laws and ethical standards and practices. We believe they can compete with the best and win fairly.
As the Minister of Foreign Affairs stated on February 5, when announcing these new measures:
Canada is a trading nation. Our economy and future prosperity depend upon expanding our trade ties with the world. This, we hope, is a good faith sign that Canada's good name retains its currency.
With that, my colleagues and I would be happy to answer any questions you may have.
Thank you, Mr. Chairman.
View Bob Dechert Profile
CPC (ON)
Thank you, Mr. Chair, and thank you, Mr. Kessel and your colleagues, for being here this morning. This is very important legislation for Canada to pass. I appreciate your assistance in helping with the drafting of the bill, helping to appear before Senate and parliamentary committees, and helping to move it along.
I believe that all the political parties, at least at this stage, are in agreement that this is something that needs to be done soon.
Last week I had the opportunity to speak to the Transparency International Canada conference, and they expressed wide support for this legislation. There were people in the room representing stakeholders in government, academia, NGOs, businesses, law firms, accounting firms, and other kinds of consulting firms, and they all agreed that this was valuable legislation that should pass very quickly.
Mr. Kessel, in your opening remarks you mentioned the 2008 OECD working group on bribery report. It outlined some recommendations for Canada. Would it be fair to say that Bill S-14 is a response to the OECD report? Can you specifically tell us how the legislation addresses each of those recommendations? As a signatory to a number of anti-corruption conventions, including the OECD convention, does this help Canada live up to its commitment under those conventions?
Could you address those questions for us?
Alan H. Kessel
View Alan H. Kessel Profile
Alan H. Kessel
2013-06-11 11:20
In my third hour of response to Mr. Dechert, I'll get to a number of these questions.
Voices: Oh, oh!
Mr. Alan H. Kessel: Maybe I can condense it, because it's starting to feel like a law school exam again.
The reality is, absolutely. Let me also put it in context. You're not dealing with just some amorphous working group on bribery sitting in the basement of a building in Paris. We're actually dealing with peer review by our colleagues.
In the review of Canada, we had the U.S., a very strong reviewer, I must say, which holds its own high standards, together with Austria. One of the things that was developed under this particular piece of international treaty work was to say it's all very well that treaties are created and are sent out there, and they expect countries to just say yes, we've lived up to our obligations, but what they did put in there was a review mechanism by peers. I have to say that some of us don't like it too much, being under scrutiny; it was extremely painful on occasion sitting there in those meetings and being told we didn't live up to the values and ethics that we thought we had. The Americans are extraordinarily tough.
The result of that review and examination and entrail reading was to come up with a series of very specific items. I don't want to belabour all of them, but, for example, the not-for-profit issue was one that they found extraordinarily odd, as it doesn't appear in many other countries. In fact, no other country has it in their legislation. That came up as an issue. The question of prosecuting nationals hasn't been obligatory in the past, and we didn't think about it about 20 years ago when we brought this in. It appears that smart accountants and lawyers other than ourselves have suggested to their clients that they should just go overseas, do their corrupt practices from an office in another country, and therefore they wouldn't be prosecutable in Canada. This was seen as a massive, gaping hole. Canada could stand up and say they were applying all the language of the law, but the spirit of it was being abrogated. The issue of nationality jurisdiction now says that if you're a Canadian and you think you're going to go to Unga Bunga, and you're going to sit there and do some horrible thing to some other country, forget it, because we're now going to get you. We have now made it easier for prosecutors, who before had to show a substantial link to this country before they could prosecute. It has removed that.
One of the things that we got high marks on was that particular thing.
The other thing was companies were running two sets of books. They had one set of books that were reviewed by the auditors and looked perfectly good, and another set of books that were not. We do have falsification legislation, but this was specifically designed to ensure that when their companies were overseas and their chief of marketing and sales was giving a cool million dollars to whomever to ensure that there was a deal, that went into a different set of accounting. What we've now put in place is a very clear criminalization of that particular issue.
The other question....
View Hélène Laverdière Profile
NDP (QC)
To clarify, it was not a hostile question; it was a matter of understanding the system.
Very briefly, also, Mr. Kessel, you mentioned that this bill will cover most of the recommendations of the OECD working group. What will be left? What is the next challenge on the OECD working group recommendations that we won't have fulfilled yet?
Roland Legault
View Roland Legault Profile
Roland Legault
2013-06-11 11:46
Thank you for this question.
I will speak in French, since no one on this side of the table has done so for some time.
It seems to me that an important recommendation was not implemented. This recommendation relates to the sharing of personal tax and income tax information. Canada cannot go this route because, based on its tax system and, more specifically, its income tax system, taxpayers provide personal information and the government is obligated to not disclose it. Taxpayers provide reliable information as part of the income tax system specifically because the information is not disclosed or used for other purposes.
View Dave Van Kesteren Profile
CPC (ON)
Thank you, Chair.
Thank you for being here.
Somebody mentioned South Sudan. The chair and I travelled to South Sudan. I love South Sudan. I get pumped when I see South Sudan. It's the poorest country in the world, but I get pumped about these people. I think they have the potential to do incredibly great things, and I'll tell you why.
I see people there who are just biting at the bit to get into business, to go to work. There's just this frenzy of activity, but it is such a wretch. They've been fighting for 40 years. They have no infrastructure. There are no lines. If you want electricity, you have to get yourself a generator.
We travelled to a farm, and that's the reason we went, actually, to visit a group of Canadian philanthropists who are trying to introduce modern farming techniques. They import all their food, and yet they have the ability to not only feed themselves but probably feed that whole region. It's incredibly rich.
I'm not telling you anything you don't know, Mr. Cornelius.
When I look at that and I see that incredible opportunity, I get frustrated at the status quo.
I'll tell you why I get frustrated. When we went to Juba, there were lots of cars driving around, but they're all NGOs. The UN had all their trucks flying by, and everything. The government is completely hamstrung because they can't do anything. If they're going to get any money, they have to listen to what these fellows are saying. Yet these people are literally sitting on a gold mine. “There's gold in them thar hills”, and there's copper, but there are no roads and there's no infrastructure.
Maybe I'm a little bit naive, but here's the way I see it. As Canadians, we could help those people. We could help them get into those copper mines and those gold mines. We could introduce them to companies. Here's where international trade comes in. We're going to introduce you to a company, Goldcorp, or something like that. By the way, these fellows are not here for the same reason. They're not here because of humanitarian aid. They're here for profit. But there's going to be a spinoff, and the unguided hand is going to go to work like you would never believe. We could see an infusion of wealth into that country.
Like that NDP farmer and that Reform farmer, I understand there are two opinions here. But doggone it all, we have tried the other method. I haven't travelled as extensively as you have, but I've been to Ghana, for instance, and I've seen projects that don't work and I've seen projects that do work, but inevitably, the private sector has to get involved.
I'm going to tell you one other story, because we're tying this thing all into Foreign Affairs. Turkey is a Muslim country. It's a moderate Muslim country. I think it's the gateway to the Muslim world, and they're involved in aid work, too. They're really successful with other countries. They're not really successful with Christian countries like South Sudan, but they're working within North Sudan. I shouldn't call it North Sudan—Sudan. What an opportunity we could have, as soft powers, if we started to work with Turkey. They have enough oil up there. I think it's the third-largest reserve in the world, and it's just sitting there. The poor people in the north, they have no money because it won't flow that way, and the south....
But if we could work with Canada and Turkey, and get these two countries together, now, see, we're working with CIDA, we're working with International Trade, and we're working with Foreign Affairs. Doesn't that just make a whole lot of sense?
This is one example where we could set the world on fire in a place like Sudan, and I believe we could ultimately change that whole area of Africa. The people are ready and they have everything they need right there at their doorstep, but nobody's exploiting it.
Are we wrong to suggest that, or even to dream that kind of a dream?
Jim Cornelius
View Jim Cornelius Profile
Jim Cornelius
2013-05-21 12:50
You're not wrong to dream it. The potential of South Sudan is enormous, both in terms of its agricultural land and its resources. It's critical. The key thing that we've learned over many years, of course, is that the governance structure has to be put in place and the infrastructure has to be put in place. We can give you as many examples of places where there's good land and good resources and lots of companies are involved, and poverty is not reduced because of the governance structure and who captures that wealth. Unless there's good governance put in place to ensure that the benefits go to the whole population—
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