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Results: 136 - 150 of 226
André Lareau
View André Lareau Profile
André Lareau
2021-06-15 16:07
Good afternoon.
Thank you for inviting me to appear before the committee today.
Several years ago, I met the journalist Laurent Laplante. He told me that you can't control what you can't see. That sums up the topic of my presentation today, which will primarily focus on KPMG's planning in the Isle of Man.
I'll make an analogy with chefs. When you want to make a recipe, you use various ingredients, which are all good. However, when put together, these ingredients can yield a surprising and sometimes disappointing result. That's exactly what happened with KPMG's tax planning.
The ingredients were the incorporation of a company in a tax haven. People donate money to a company. The company then invests the money and gives the returns back to the investors in the form of donations. The individual ingredients aren't a problem. The incorporation of a company isn't an issue, and neither are the donations. However, when you put all this together, it creates an unbelievable trick that looks like fireworks. It doesn't work.
Brian Arnold, a professor at Western University in London, Ontario, once said that KPMG's strategy was like a tax‑free savings account, or TFSA. It was a TFSA without a cap and designed exclusively for wealthy people. Professor Arnold also asked another person, with whom he was taking a walk, what they had to say about KPMG's planning.
The person had this to say about the planning:
“So let me get this straight. You give several million dollars to strangers on some island somewhere, but whenever you want some of that money, you can get it and you don't pay any Canadian tax. It seems too good to be true.”
In my experience, most things that seem too good to be true turn out to be untrue.
KPMG said that it set up the scheme 16 times. The firm charged a fee of at least $100,000 for each strategy, and even more, because amounts were also payable annually on the returns. Did KPMG use this strategy anywhere other than the Isle of Man? We don't know. KPMG refuses to answer this question.
In their testimony, Greg Wiebe and Lucy Iacovelli said that the firm realized back in 2003 that it had to stop using this strategy. We're now told that this strategy was used up until 2014. This strategy wasn't used up until 2010, as we thought, but up until 2014 and maybe even 2015. We even know that KPMG received fees for the strategy at least until 2008, according to a letter sent by Mark Meredith from KPMG to Cecilia Jenkins from the Canada Revenue Agency, or CRA, on January 6, 2012.
The Cooper family is the only family that challenged the notice of assessment. The Cooper family members not only went to court to challenge the notice, but they later took the bold step of making a voluntary disclosure, because they continued to use the strategy until 2015. On December 31, 2015, through their counsel, they submitted a voluntary disclosure application. The Canada Revenue Agency told them that their application was inadmissible because they were under investigation. Their counsel even submitted a request to have the Federal Court review the Canada Revenue Agency's decision. The entire Cooper family case was subsequently settled.
We've recently heard a great deal of talk about the #MeToo movement. This movement is making people aware that criminal acts aren't subject to the statute of limitations. A criminal act doesn't stop being criminal over time. The crime committed isn't any less serious after time has passed. Economic crimes must also be prosecuted, even after all these years.
In the case of KPMG, the court must be involved. The extent of any tax evasion must be verified. I don't need to share my conclusion, which you know. However, the court must look into this matter.
A theory was created in 2012 in the Meeds v. Meeds case before the Court of Queen's Bench of Alberta. The theory is called organized pseudolegal commercial arguments, or OPCA. This theory suggests that people use arguments detached from a given reality to convince individuals that they're right.
Maybe you know the Fiscal Arbitrators. These people decided to file tax returns for clients. They would then charge them a fee. However, they created fictitious losses for them. The creator of Fiscal Arbitrators is in prison today and is serving a six‑year sentence.
Is there really a difference between the creator of Fiscal Arbitrators, who promised losses that didn't exist, and KPMG's strategy, which promised donations that didn't exist? Those donations didn't really exist.
The Meeds decision states as follows:
A court or legal professional can explicitly and clearly respond to this category of pseudolaw. However, some OPCA pseudolaw, “Otherlaw,” is entirely disconnected from “mainstream” law, and represents a “something else” category of thought, belief, and behaviour.
That's exactly what happened here.
In conclusion, I would say that a public inquiry must be held in the KPMG case. Subsection 231.4(1) of the Income Tax Act states that a public inquiry may be necessary to shed light on this situation.
If, in their wisdom, the courts conclude that there wasn't any tax evasion, so be it. However, people are currently outraged by this planning.
Thank you for your attention.
View Peter Julian Profile
NDP (BC)
Thank you very much.
Now, I'd like to go specifically to the issue of KPMG. On this file with KPMG, how many meetings were held between CRA and KPMG?
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 16:08
I would have to get the answer, but I would say there would have been dozens of meetings.
View Peter Julian Profile
NDP (BC)
How many written communications were there between KPMG and CRA?
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 16:08
Again, we're talking about more than 25 clients, so there would have easily been 100 different pieces of correspondence. There was litigation on finding out who they were and then resolving the actual tax bill that they had to pay in getting to that $24 million amount I talked about.
View Peter Julian Profile
NDP (BC)
As a final question, has KPMG ever consulted with CRA about how to change the Isle of Man scam to make it more acceptable to CRA?
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 16:10
Not to my knowledge, no, and it would have been highly unusual if they had.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you, Mr. Chair.
Mr. Gallivan, on behalf of the Canada Revenue Agency, do you have a message to reassure the thousands of small investors who were defrauded in the case involving Mr. Weinberg and executives of Norshield and Mount Real?
How are your investigations into the sword companies and their possible links to KPMG progressing? Are you working with the Royal Canadian Mounted Police (RCMP) on this matter?
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 17:09
My message is that we have joined the team already working on this file. We are trying to gather the best information available. As we gather the facts to the extent possible, we will move forward and determine the consequences based on those facts.
View Peter Julian Profile
NDP (BC)
I will ask you to answer the same question in English.
With regard to all of these people who have been defrauded of their retirement savings in these various scandals linked to KPMG, what is your message to those people who have lost their retirement savings?
I'll also ask if you can tell us the sum total of those funds that have been collected, and those charges laid internationally, with all of the overseas tax havens that Canada has agreements with.
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 17:10
I'll repeat the answer quickly in English that I provided previously in French, which is that the CRA did become aware of the situation and we are pursuing additional facts. To the extent that we can get facts and data, we will apply whatever consequences we can legislatively. I think the investors should know that the CRA is playing its role in relation to any of the statutes that we administer.
The second question seemed to be the on total charges related to offshore tax evasion levied by us and partners. Could I suggest an OPQ or another written question, so that I make sure I can address it? I am not sure if this is related to the matter at hand or all forms of tax evasion. I just want to be clear on the question.
Lucia Iacovelli
View Lucia Iacovelli Profile
Lucia Iacovelli
2021-05-06 15:44
Thank you for the invitation to appear before this committee.
I am KPMG's Canadian managing partner for tax.
Before I commence with my remarks, I'd like to extend my sincere sympathy to Ms. Watson and all of the other victims of the Cinar fraud. We know that you've been seeking answers for a long time, and I wish we could help you. We simply do not have any connection to Cinar. We were not their auditor or their tax adviser. We did not help any of the people who carried out the fraud to take your money or hide your money.
At KPMG we ensure that our clients are able to work within the tax system, achieve their goals and pay the tax they are required to pay. That is the lawful tax planning work that we do for our clients across Canada every day, and in accordance with KPMG's policies, practices and culture, we ensure the highest standards of integrity, compliance and professionalism.
Like most professionals, as CPAs we are required to protect the confidentiality of information regarding our clients and former clients. We take that obligation seriously, but when we receive a legal order requiring us to disclose client information, we comply with it. In February 2017, for example, in accordance with the CRA requirement, we provided the CRA with all the names and all of our files related to the OCS implementations in the Isle of Man.
I would also like to address recent reporting by the CBC, which is focused on four corporations, referred to as the “sword” companies, which were established in the Isle of Man in the early 2000s. It's alleged that these companies were used to facilitate the Cinar fraud. I don't know whether that's true. I do know that any implication that KPMG had anything to do with the Cinar fraud is false. Any implication that KPMG was in any way involved with the “sword” companies is also false.
We can state this with confidence because we undertook the comprehensive and detailed due diligence of our files, records and personnel. We combed through millions of pages of documents. We reviewed our time and billing systems. We examined our client file databases, and we interviewed people. We took the added step of reviewing publicly available corporate documents from the Isle of Man. Through all of this, we found nothing that suggested that KPMG had any association with the “sword” companies.
We provided this information to the CBC, making it clear that they were mistaken, but they persisted in publishing irresponsible and misleading stories. As a result, our lawyers served a notice of libel on the CBC last week. The CBC's allegations mistakenly rely on emails, written 15 years after the fact, by a woman named Sandra Georgeson, and on similarities between the “sword” companies and KPMG client companies.
Let me address these mistakes one by one. KPMG, like other firms, commonly uses the support of corporate service providers to set up and help administer companies. There are a lot of these firms that do this work around the world. Ms. Georgeson worked for one such firm in the Isle of Man. In the early 2000s, KPMG in Canada offered a legal tax plan, known as the OCS. The OCS required the incorporation of companies in the Isle of Man, and Ms. Georgeson's firm was retained to do so. Fifteen years later she was asked by her new employer to prepare a list of these companies. Her recollection in 2015 was that the “sword” companies were examples of KPMG OCS implementations. They were not.
In its reporting, the CBC pointed to similarities in the sequential registration numbers, named directors, signatories and filing addresses between the OCS and the “sword” companies as evidence that KPMG set up these companies. The CBC is simply wrong in drawing this inference.
The similarities exist because whoever registered the “sword” companies used the same corporate service provider as KPMG, but our diligence shows that the “sword” companies do not belong to, or are in any way connected to, KPMG.
I wish we could help reunite the victims of this fraud with their money and bring the perpetrators to justice, but we can't. KPMG simply does not possess any information that could assist with the Cinar investigation.
Putting the CBC's unfounded theories about Cinar aside, the broader issue that is before the committee today is how Canada could combat aggressive tax avoidance and tax evasion.
We applaud the committee's review of this important issue. We share the committee's desire and we welcome the opportunity to contribute to the discussion today.
Thank you.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you, Mr. Chair.
I would first like to give my regards to all our guests and thank them for their presentations. I also want to thank them for joining us today.
Ms. Watson, your testimony was very powerful. Let's hope that justice is done.
I would also like to acknowledge our colleague Elizabeth May, who is with us today.
Finally, I would like to remind you that my colleague Stéphane Bergeron is bringing motion M-69 to the House, which includes most of the measures suggested by the guests to combat tax avoidance and tax evasion.
My questions are for the representative from KPMG.
Ms. Iacovelli, I'm asking you and KPMG Canada to provide the Standing Committee on Finance with the following information.
KPMG has put in place tax strategies that provide a financial vehicle for some of its clients to reduce the tax they owe. For each case where KPMG Canada has directly or indirectly created or assisted in creating one or more companies in the Isle of Man, thereby enabling one or more Canadian taxpayers to hide money or reduce their tax payable, I am asking you to provide the committee with: all the documents used in these plans; a list of the companies created through these strategies; a list of the directors and officers associated with these strategies; a list of all those who benefited directly or indirectly; and the fees received by KPMG for each of these plans.
I would also ask that you provide us with the complete information for each plan carried out in a country or territory other than the Isle of Man and that you identify the country or territory. Of course, the clerk will be able to send you this request. If you are unable to respond fully now, I would ask that you provide your responses in writing to the Standing Committee on Finance as soon as possible or within 30 days.
Are you taking note of that?
I will continue with my questions.
Lucia Iacovelli
View Lucia Iacovelli Profile
Lucia Iacovelli
2021-05-06 16:23
Thank you.
That was quite a comprehensive question, so I'll try to approach everything that I think I heard.
I want to be clear that KPMG did not set up shell companies to hide money. That's not what we do. We provide legal advice that's tax-effective and we require that our clients meet all their filing obligations.
With respect to your request in terms of providing information, under my code of conduct I'm not able to provide you with client information unless there's a legal order that's provided. We have dealt with the CRA's request. We have provided the CRA with a list of all of the OCS clients and provided the CRA with the OCS files as well.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you.
There may have been a problem with the interpretation. I never implied that KPMG had set up strategies that were deemed illegal. That is not what we are talking about. To my knowledge, KPMG, an accounting firm, does not have the authority to refuse to provide such information to a parliamentary committee in Ottawa.
Just to make sure that we understand each other, the clerk can send you the request that I just made and you can provide us with your response within 30 days.
I will also ask you to provide us with the Canada Revenue Agency decision on each client file at KPMG Canada, including refunded taxes, accrued interest and penalties incurred, for each individual.
Thank you.
Results: 136 - 150 of 226 | Page: 10 of 16

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