Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 32 - Evidence - April 25, 2013

OTTAWA, Thursday, April 25, 2013

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred 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, met this day at 10:31 a.m. to give consideration to the bill.

Senator Irving Gerstein (Chair) in the chair.


The Chair: Good morning and welcome to the Standing Senate Committee on Banking, Trade and Commerce. This morning our committee will continue our study of Bill S-17, the proposed tax conventions implementation act, 2013.

The purpose of this measure is to implement four recent tax treaties that Canada has concluded with Namibia, Serbia, Poland and Hong Kong. This legislation will also implement amendments to provisions for the exchange of tax information found in the tax treaties that Canada has concluded with Luxembourg and Switzerland.

Last Thursday we heard from the Honourable Ted Menzies, Minister of State (Finance) along with officials from the Department of Finance. They spoke to the policy development process that goes into negotiating, drafting and the subsequent ratification of tax treaties. Today we will hear from the Canada Revenue Agency, who will be able to answer senators' questions regarding the implementation of tax treaties. From the Canada Revenue Agency, we are pleased to welcome Guy Bigonesse, Director, Aggressive Tax Planning Division — I want to catch that word ``aggressive'' — and Karen Brodmann, Senior Advisor, Tax Treaties.

Members of the committee, we will have an opening statement from Mr. Bigonesse and then I already indicated to him that it is not often that members or individuals get to question CRA. It is usually the other way around, but we look forward to it. Mr. Bigonesse, the floor is yours.


Guy Bigonesse, Director, Aggressive Tax Planning Division, Canada Revenue Agency: Thank you, Mr. Chair, for the opportunity to provide the Senate committee with some information about the role of tax treaties in tax administration in Canada.


My name is Guy Bigonesse and I am the director of the Aggressive Tax Planning Division within the Compliance Programs Branch of the Canada Revenue Agency. With me is Karen Brodmann, Senior Advisor, Tax Treaties, from the Legislative Policy and Regulatory Affairs Branch.

My colleagues from the Department of Finance discussed how tax treaties benefit international trade and commerce and the broader exchange of information provisions in the treaties and protocols in Bill S-17. I would like to comment on the important role tax treaties play in the CRA's overall approach to promoting compliance with Canada's tax laws.

The CRA conducts audits and corrects non-compliance that is identified. In recent years we have increased our focus on high-risk issues such as international tax evasion and aggressive tax avoidance. In the most serious instances of tax evasion, we build cases for criminal prosecution.

The ability to obtain information is key. The CRA requires accurate and timely information to ensure effective risk assessment and identification of non-compliance.

Audits rely on information. In an increasingly globalized economy, treaties and tax information exchange agreements allow us to access information that exists outside our borders. Without such agreements it would be much more difficult, and often impossible, to obtain information located outside of Canada. In order to identify and verify offshore income subject to tax in Canada, we need access to information available in other jurisdictions.

Budget 2013 announced additional measures to provide specific tools to enhance the CRA's ability to address international tax evasion and aggressive tax avoidance.

The measures include enhanced foreign reporting requirements, the Stop International Tax Evasion Program, and increased information reporting requirements for financial institutions relating to international electronic fund transfers. These measures will increase the CRA's ability to audit, investigate and pursue cases of international tax evasion and aggressive tax avoidance by providing specific information that can be supplemented through our network of tax treaties, tax information exchange agreements and the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, and deter taxpayers from avoiding or evading their tax obligations.


Exchange of information, as well as otherwise engaging and collaborating with other jurisdictions, is an integral part of the CRA's approach to detecting, deterring, and addressing international non-compliance.

Thank you for this opportunity. We would be pleased to answer questions from the committee regarding the role of tax treaties in tax administration in Canada.


The Chair: Thank you, Mr. Bigonesse, for your opening comments. When officials from the Department of Finance were here last week they said:

Without a treaty, the CRA does not have the authority and the other country does not have the obligation to get us information.

There is no doubt that information sharing is essential in detecting not only double taxation but also tax evasion. From a compliance-specific perspective, how do treaties like the one contained in this bill assist CRA in its efforts to catch tax cheats both in Canada and abroad?

Mr. Bigonesse: Thank you for that question. As I explained, audits rely on information gathering. I often link it to building a puzzle with pieces of information that will enable the CRA to make a decision or analysis about identifying non-compliance. In aggressive international tax planning, there are often missing pieces of that puzzle because the information is not located in Canada but in offshore jurisdictions. It is key for the agency to be able to contact our treaty partners to be able to gather this information, which will enable us to continue work on our puzzle that we are building and the ability to analyze the compliance of a taxpayer with all the information that we can have.

As I explained, without this possibility of contacting tax treaty partners, we would not be able to complete the puzzle and have a proper analysis of the non-compliance of taxpayers in Canada.

The Chair: Thank you. We have some questions from senators.


Senator Massicotte: Thank you, Mr. Chair; I will stay on the same topic as my colleague. In terms of information, we are going to talk about Hong Kong, Luxembourg and Switzerland. Is the treaty proposed in the bill the main way of finding out information from those partners, or are there other agreements that give us the right to ask for information on taxes or money laundering?

Mr. Bigonesse: In terms of taxes, tax agreements are the one and only way of gaining access to information that might be in those countries.

Senator Massicotte: Are there no agreements additional to the treaty?

Mr. Bigonesse: I can tell you that there are two kinds of agreements that Canada has with some countries and some jurisdictions. There are agreements in the form of tax treaties. There is another kind of agreement with jurisdictions with which we do not have tax treaties; that is called an information sharing agreement. Those agreements deal specifically with information exchange.

Senator Massicotte: If I understand correctly, with the proposed agreement with Switzerland and perhaps with Luxembourg, let us say someone has a bank account in those countries. We do not know the name. We suspect the name is X. As I understand it, the Swiss have the authority to tell us that the bank account exists and that it contains a balance; they can confirm our information but they cannot link it to the account holder.

Mr. Bigonesse: I am not an expert on treaties. I will let the expert add to my answer. But, as I see it, our position is that, while we are not able to identify a taxpayer and an account with those treaties, we can now ask for detailed information about the accounts.

Senator Massicotte: But if it is a numbered account and we believe that it is held by a Canadian, we cannot ask them to confirm whether or not it belongs to Mr. or Ms. X.


Karen Brodmann, Senior Advisor, Tax Treaties, Canada Revenue Agency: That is one of the reasons for the change to the Swiss treaty; we can now ask for information from Switzerland or Luxembourg. If we have an account number, we can send that to them and ask them for the information on that account.

Senator Massicotte: If I understand all of this, your right to information only starts from the point that this becomes law?

Ms. Brodmann: Yes.

Senator Massicotte: I will not name them, but if you had a Canadian with an offshore account in Switzerland, if he was smart he would clean up his act right away. You have no right to get previous information; you only start from there. Canadians should clean up their act and avoid any problem they could have with Switzerland. The information is so specific; am I correct?

Ms. Brodmann: Absolutely, they should clear up their problems as soon as possible.

Senator Massicotte: You cannot go back because you will not get the information from that country.


Mr. Bigonesse: What I mean by your term ``clean up your act'' is come and see the agency, rectify the non- compliance that may have happened in the past and clear things up with us.

Senator Massicotte: Yes, but, if Switzerland cannot give us information from the past, why do it now? I know that it is recommended, that it is morally the right thing to do. I am not seeing the tools you have that let you go back into the past.

Mr. Bigonesse: If you look at the tools proposed in Budget 2013, we now have the tools to be able to identify for ourselves any Canadian taxpayers who may have foreign accounts in other jurisdictions. We have the information to tell us which is their bank account and which country it is in. With that information, with which we can identify people in Canada, we can use the treaties with Switzerland and Luxembourg to ask for information.

Senator Massicotte: The RCMP tells us that from $5 billion to $15 billion are laundered in Canada. They are trying by every means possible to bring that capital into the Canadian economy but they are losing track of the laundered money. When we think that the money has gone off to Switzerland or to Luxembourg, my understanding is that the treaties do not give us the right to ask for that information. It may not be legal in those countries; even if we believe that it is lost revenue and that there are unpaid taxes, we have no right to touch it. Is my understanding correct?

Mr. Bigonesse: I am not an expert in money laundering; my expertise is more in taxation. But I can assure you that with the tools we have in Budget 2013, with the tax agreements we have with certain countries, we can identify Canadians who have bank accounts in other countries and revenue from other countries. We can now identify them and ask for detailed information on the accounts and the income they have received in those countries.

Senator Massicotte: Even in Switzerland, when the treaty clearly says no? The treaty is very specific. It does not give you the right to go on a fishing expedition. With Switzerland and Luxembourg, the treaty is very precise.

Mr. Bigonesse: We are not talking about fishing expeditions. I am talking about the tools that Canada has to identify a person or a bank account in Switzerland. This is specific information that we can use to make a request to Switzerland.

Senator Massicotte: Where do you get that information from?

Mr. Bigonesse: With the new tools.

Senator Massicotte: But how do you know the information exists? Mr. and Ms. X are not declaring it on their tax returns. How do you know that it exists?

Mr. Bigonesse: Let me tell you about one of the tools in Budget 2013.

Senator Massicotte: Go ahead.


The financial institution will have to provide information to the Canada Revenue Agency about electronic fund transfers made by Canadian taxpayers to offshore jurisdictions. Before, this information was provided to FINTRAC under the Money Laundering and Terrorist Financing Act. Under this bill, this information will be provided to the Canada Revenue Agency as of 2015. This information will be specific to Canadian residents transferring funds to offshore jurisdictions. With this information we will be able to effectively risk assess taxpayers who invest offshore and obtain specific information. We will be able to use those treaties and tax information exchange agreements to get further details.

Senator Massicotte: We studied FINTRAC in depth, and I thought that obligation existed. If FINTRAC of the CRA is suspicious of a transaction, they have the legal authority today to share that information. The only change being proposed by the bill is to make all international transfers reportable; and there is no minimum. We are talking about minimums, which does not make a difference if you are hiding millions of dollars. How can you be so optimistic that we will get there, given the type of treaties we are signing and the significance of the problem?

Mr. Bigonesse: FINTRAC information was provided to the CRA. There were some restrictions about the information that could be provided to the CRA. You had to identify money laundering or terrorist financing and tax evasion. Therefore, if tax evasion was identified by FINTRAC but they could not identify money laundering or terrorist financing, then the information was not shared with the Canada Revenue Agency. Under the new process of having the bank provide us with this information directly, we will have the information without any of these restrictions.

Senator Black: Arriving here today, I thought this was pretty straightforward. However, your comments have confused me a little. It is likely me, not you.

Let us take Poland as an example. We do not have a tax treaty with Poland.

Ms. Brodmann: Yes.

Senator Black: What about Hong Kong?

Ms. Brodmann: No.

Senator Black: What we are doing here is updating and modernizing the treaties. I did not understand that; but now I do.

Using Poland and our existing arrangements as an example, I want to understand what additional information you will be able to obtain because of these new treaties.

Ms. Brodmann: With respect to Poland, since we have an existing treaty with them, nothing much has changed. Poland did not have bank secrecy so it was not as important to have the international standard for the exchange of information. Namibia, Serbia and Hong Kong will be new treaties, so we will have access to information where we never had it before. With respect to Luxembourg, the tax treaty provision did not override Luxembourg's bank secrecy legislation. Under this bill, we will have a lot more access to information generally in Luxembourg that we never had before.

Senator Black: That is helpful. Today in Hong Kong you could endeavour to get information but they could simply say no?

Ms. Brodmann: They would absolutely say no.

Senator Black: They would be obligated to say no.

Ms. Brodmann: They do not have the authority, especially for bank information. They may have some other information that they can share.

Senator Black: Today the door is shut, but tomorrow the door will open with this bill.

Ms. Brodmann: Yes.

Senator Black: I see that we have an agreement with China. I thought Hong Kong was part of China. Why do we have Hong Kong and China?

Ms. Brodmann: Hong Kong is not part of China for the purposes of the tax treaty. The tax treaty applies only to areas that apply the same tax legislation as China; and that is not Hong Kong.

Senator Black: They have different tax regulations in Hong Kong?

Ms. Brodmann: Yes.

Senator Black: Thank you.


Senator Hervieux-Payette: First, a little practical question. In your office, how many people look after these international tax questions? Is it a big, impressive group?

Mr. Bigonesse: I do not have the exact figures with me, but it is an impressive group. A few years ago, we refocused our resources on aggressive international tax planning and we have definitely dedicated a number of resources internationally. With globalized economies, it is important to do that.

Senator Hervieux-Payette: You do not have to tell me that it is 254 or 268, but would I be right in suggesting a number around 250 people or 500 people? How many people are we talking about?

Mr. Bigonesse: I do not have the figures with me and we can get them to you afterwards, but I think we are talking about between 800 and 1,000 people.

Senator Hervieux-Payette: Dealing strictly with international matters.

Mr. Bigonesse: With international matters, yes.

Senator Hervieux-Payette: I would like to know the number of files that you process each year. They cannot all have the same degree of complexity, after all. How many files does your division process? If you can send us the figure with the first question, I think that that will give us an idea of the efforts of the government is making specifically to make sure that the agreements are enforced.

Could you tell me whether you have any officers who have different training than staff who spend their time auditing the average Canadian taxpayer making $50,000? Do any of your people specialize in certain areas?

Mr. Bigonesse: Allow me to elaborate on the figures because there are a few I can clarify. With respect to our aggressive tax planning initiative, since 2007, we have conducted nearly 8,000 audits that brought in $4.5 billion in taxes. So that comes under the planning initiative.

Senator Hervieux-Payette: Between 2007 and 2012, or between 2007 and 2013?

Mr. Bigonesse: I believe between 2007 and 2012, as we do not yet have the final numbers for 2013.

Senator Hervieux-Payette: At the last meeting, I asked that a request be forwarded to you. I wanted the file on Mr. Falciani and the HSBC database that was provided to most countries. As a result of the information, France recovered $1.5 billion and Spain also collected a significant amount. What did the Government of Canada do with the names on that list? How many of them were contacted? The names are there. It is not difficult. There were not 10,000; it was a pretty reasonable number, and it has been over a year.

How many people came to you of their own accord to say they had forgotten to report those amounts but were ready to reach a settlement? How many did you settle with and how many are currently under investigation?

Mr. Bigonesse: When we receive information from one of our tax partners under a convention, the information shared is subject to confidentiality, preventing us from discussing the details of that information. I can assure you that, when the CRA receives information on people with offshore assets or income, we respond. Again, I would point to the fact that, further to our international aggressive tax planning efforts, we have conducted 8,000 audits resulting in $4.5 billion in new tax money, as I mentioned. It should also be noted that, under the Liechtenstein project we launched, we identified 106 Canadian taxpayers with ties to offshore bank accounts. We took action, we conducted audits and we brought in $22 million in taxes.

Unfortunately, when we receive information from one of our tax partners, we cannot divulge details of that information.

Senator Hervieux-Payette: I think you misunderstood me. Mr. Falciani is not a tax partner. He was an HSBC employee. He released a list with hundreds of names of people from a number of countries around the world who were cheating the system. He was not compensated. He was arrested in Spain for, quote unquote, stealing the list. He stole the list of thieves. I have some sympathy for thieves of his ilk, particularly since his actions brought him no personal gain, only a lot of headache.

I am referring to that list specifically. It did not come from the Swiss authorities, who wanted his extradition. They want to prosecute him and bring him to justice in Switzerland for divulging the names of all those people who had hidden their money in HSBC bank accounts. There is a specific case involving HSBC, but a tax partner did not give you the information. It was an individual, a private citizen, who obviously lost his job.

I mentioned two countries that took action and recovered considerable amounts of money. Did we do anything? It was all over the papers. Many Canadians heard about that operation, and we want to ensure that our own tax authorities did the same thing France did. It indicated how many of its citizens were involved. Things slowed down because there were apparently steps that had to be taken. So I would just like to make sure that we, in Canada, are still investigating the matter, and I do not want a general answer. I want to know about this specific case, which does not involve a government-to-government exchange or an official disclosure. It involves one individual who released a list that you have a copy of.

Mr. Bigonesse: The information you are speaking of comes from media reports. We never dealt with the individual you are referring to. We did not receive the information from the person you are speaking of. It came to us by way of a treaty, from a tax partner with whom we have a treaty, and for confidentiality reasons, we cannot comment on information pertaining to an HSBC list.

Senator Hervieux-Payette: It is not possible to have a whistle-blower? What if I know that my neighbour makes $50,000 a year, but he owns a $3-million mansion, drives around in an Alfa Romeo and vacations down south every three months? I think to myself that something is wrong with that picture; my neighbor has a modest job but lives like a king. So I decide to call you. What happens? Surely, there must be people who act as whistle-blowers in Canada.

Mr. Bigonesse: We certainly have a whistle-blower program in Canada. And the Stop International Tax Evasion Program was announced under the 2013 budget.


It will provide a reward to any individual who has significant knowledge of international noncompliance and is willing to provide the Canada Revenue Agency with enough information for us to be able to ensure compliance and collect additional tax. A reward of 15 per cent will be available to these individuals.

In the future, thanks to this program, we will be able to reward people who want to provide us with information on significant non-compliance.


Senator Hervieux-Payette: Which people? Just Canadians? So can I contact Mr. Falciani and tell him that, for all those he identified with HSBC accounts, he will receive a 15-per-cent reward on all the money we are able to collect? Or are Canadians the only ones eligible for the reward?

Mr. Bigonesse: Anyone. A few exceptions do apply to government workers. But when any person provides us with significant information on international non-compliance that results in the CRA recovering at least $100,000, that individual is eligible for the reward.

Senator Hervieux-Payette: I will probably find him a job.


Senator Oliver: I understand the importance of Bill S-17. It seems that for a long time you have been trying to work with other countries to have international standards for the exchange of information in relation to tax. You are happy with the 2013 budget and with much of the content of Bill S-17. When you were giving your opening remarks, I was amazed to learn about the other information and access you have. You said that you have tax information exchange agreements and a Multilateral Convention on Mutual Administrative Assistance in Tax Matters. I do not know what that is. Could you explain it to us? Does it give you the power to audit? Does it give you the power to investigate? Who are the other parties to this Multilateral Convention on Mutual Administrative Assistance in Tax Matters?

Ms. Brodmann: The Multilateral Convention on Mutual Administrative Assistance in Tax Matters started out with the OECD and the Council of Europe and has opened more broadly to all countries to join. The instrument is not enforced in Canada, yet. We are awaiting the passage of a change to the Income Tax Act, after which it will apply in Canada.

Senator Oliver: Is that not in this budget?

Ms. Brodmann: That is in the technical bill, which is at second reading, I believe. Once that bill has passed, we will be able to ratify the agreement and become party to it.

The bill contains the possibility for the exchange of information and makes specific reference to automatic exchanges of information. It is hoped that as many countries as possible will sign; and more and more countries are signing on to it as we speak.

Senator Oliver: How do the powers in that multilateral agreement that is not yet law in Canada differ from the powers in Bill S-17 in terms of giving you the right for an exchange of tax and other information?

Ms. Brodmann: When you have a tax treaty, there are not many differences. Specifically, it encourages the automatic exchange of information.

Senator Oliver: Is that an automatic exchange of all information?

Ms. Brodmann: It is tax information. Different countries are at different stages of being able to do that. It also makes it easier to share information multilaterally, so that will be helpful when we are dealing with our treaty partners.

Senator Oliver: Let me ask you another question. When this Multilateral Convention on Mutual Administrative Assistance in Tax Matters becomes law in Canada, will it mean that maybe you do not have to pursue so many of these individual tax agreements, like in Bill S-17?

Ms. Brodmann: Pretty much all of the members of the multilateral convention are countries with which we already have treaties, but treaties do more than allow for the exchange of information. The multilateral convention is for administrative purposes. It does not do anything with respect to reducing tax rates or making it easier to do business abroad. Treaties will still be important.

Senator Oliver: Does it have anything to do with your power to investigate or audit? The multilateral convention will only give you access to more information from which you can then do an audit, I suppose.

Ms. Brodmann: Some of our treaties do not cover excise and GST. Many of them do not. The multilateral convention automatically brings that into play. That will update some of our treaties that do not allow that type of exchange to go on. It talks about the possibility of joint audits. It is the nature of encouraging things that we might not already do with our treaty partners and that are encouraged in the multilateral convention that might also help down the line.


Senator Maltais: Thank you, Mr. Chair. Mr. Bigonesse, why sign an agreement with Serbia? Why not Macedonia, Romania or Bulgaria? Do you have any indication that Serbia has more places to hide money than other European countries?

Mr. Bigonesse: I will ask my colleague to answer that.


Ms. Brodmann: First of all, the Department of Finance is responsible for negotiating the agreements, but we do have a treaty with Bulgaria. I do not think we have any indication that Serbia is any worse than anywhere else. The schedule was developed by the Department of Finance. I do not think it is one that we were particularly concerned about any more than any others.


Senator Maltais: Is Canada getting ready to sign a free-trade agreement with Europe? Will every country in Europe agree to share tax information on those trying to avoid paying Canadian taxes? Will all of those countries agree to take part in the information-sharing regime necessary to recover money that is not on the tax rolls right now?


Ms. Brodmann: The free trade agreement is separate from tax treaties and I cannot comment on what the next steps might be in terms of negotiating tax treaties with any of the European Union. I am trying to think whether we do not have treaties. We have 90 treaties in place already. We probably have treaties with most of the countries that would be covered by the free trade agreement.


Senator Maltais: It seems to me that it is more important to recover tax money than to trade chickens. Under normal circumstances, those things should be in place.

What about the United Kingdom? Do we have a special agreement with England, Scotland and Ireland?


Ms. Brodmann: We have a tax treaty with the United Kingdom, and it covers the full exchange of information.


Senator Maltais: Do you have one with Barbados, and Trinidad and Tobago?


Ms. Brodmann: We have treaties with Trinidad and Tobago, Barbados and several other Caribbean islands, and we have tax information exchange agreements with a number of others.


Senator Maltais: I would like to pick up on something Senator Hervieux-Payette mentioned, the 260 naughty people who cheated the tax system. Will Canada have that information some day; will it have the list of names? Is the Government of Canada, be it the Finance Department or the CRA, pursuing the matter to make sure they catch those individuals?

Mr. Bigonesse: First, our minister contacted the International Consortium of Investigative Journalists to request that it share the information in its possession with the CRA so that action could be taken. That was followed up by a letter from the CRA to the CBC in which the tax agency stated that the best interest of Canadians would be served by the CBC disclosing the confidential information it had to the CRA, so that action could be taken.

Other measures are being taken. We are always working with our treaty partners to identify ways of gaining access to that information. There is no doubt that if the CRA obtains that information, it will take action.


We will ensure that we aggressively pursue any suspected cases of tax avoidance or tax evasion.


It is important to determine whether having offshore investments or assets was illegal. So the first thing we do when we receive the information is determine whether there was compliance with the law or not.

Senator Maltais: I fully agree with you, but the Canada Revenue Agency should have its own investigators. The information should not have to come from a reporter at the CBC; the agency should not have to rely on a reporter to recover taxes owed. I think you should always have investigators in the countries we sign agreements with. The whole reason for signing an agreement is the presumption that there is money or transactions you are not aware of; otherwise, we would not sign the agreement.

I did not see an agreement with Zimbabwe. I would think that few people invest their money there. To my mind, if you are signing an agreement with a country, once it is signed, you should be examining the situation there to determine whether Canadians are evading taxes.

Mr. Bigonesse: We have criminal investigators at the agency. With respect to our agreements with other countries, we are constantly working with our treaty partners: we hold bilateral discussions to share information and best practices and to identify aggressive tax planning where we can take action in Canada. So, certainly, if we can identify an international partner, a tax partner, that may have information to give us, we will take measures to try to obtain that information.


Senator Moore: I wanted to pursue the matter raised by Senator Hervieux-Payette with regard to HSBC. How many names did you get out of that?

Mr. Bigonesse: My answer will be the same. Unfortunately, because this information was provided to us through a treaty partner, the confidentiality provision of a treaty does not allow us to provide detailed information about this.

Senator Moore: Do you mean that, in all of these treaty agreements, you cannot tell the Standing Senate Committee on Banking, Trade and Commerce how many names you have? I am not asking for the names. I want to know the quantity; I want to know how many people.

Mr. Bigonesse: Again, we try to have great relationships with our treaty partners, and, because there are confidentiality provisions in those treaties and to ensure that we have good relationships with our partners and can access any information that they will have in the future, we do respect the confidentiality agreements that exist.

Senator Moore: You are not in some kind of silo here. You are talking about the Parliament of Canada, and we are one of those legislative bodies. Who do you answer to?

Mr. Bigonesse: We looked for legal advice, and we were advised that, because of the confidentiality agreements, we cannot share the information.

Senator Moore: Does that kind of clause appear in all of these agreements, whether it is a treaty or information exchange agreement? Can you not tell us how many names? If you are telling us how many files, does that not equal names?

Ms. Brodmann: That is a global number for the number of files we are looking at. If there were 10 names, it might be easier to identify who the taxpayer is. We have to keep this information confidential or our treaty partners will not exchange with us.

Senator Moore: I do not agree with that. If you tell us 10 names, I do not know who they are, and I really I do not care if there are 10,000 names or 100,000 names in accounts in a different country. I want to know how many Canadian names there are that you are working on because that is where your money is being spent and I think you have to answer that question for us. I would also like to know how much money you have collected from those names that you have not given us, the quantity of names and how much money you collected on the files.

Mr. Bigonesse: To clarify the numbers I provided to you, those numbers do not directly link to direct exchange of information with treaty partners. There is no link. As my colleague explained, they are global numbers. I also provided you with information and numbers about Liechtenstein because this information was not provided to us through a treaty partner. Unfortunately, the details that you want is information that was provided to us by treaty partner and again because of confidentiality agreements that we have with treaty partners, I am not able to provide you with any detailed information at this time.

Senator Moore: I thought the information with respect to the HSBC came from an individual. You even said you got some from the media. You did not have an agreement with the person who was the whistle-blower in this case, whoever it was. I think it was a man. You did not have agreement with that person so why can you not give us those names?

Mr. Bigonesse: Let me clarify. I know it was alleged in the media about an individual who had stolen this information, but this individual did not come and see us and provide us with this information. The information was provided to us by a treaty partner.

Senator Moore: When you became aware of the fact that there was an individual who had names, would you not contact — and you said you had a team of investigators — that person and seek out that information?

Mr. Bigonesse: The agency did receive that information.

Senator Moore: Did you contact the person?

Mr. Bigonesse: We did not have to contact the person because we did receive the information through a treaty partner.

Senator Moore: I am not very satisfied with this. I do not know who you are supposed to answer to but I do not think you can go along and say that because we have a confidential agreement we cannot tell you. We have to know how many names you are dealing with, how many files you have and the results you are getting. Otherwise, how do we consider your budget when it comes around and justify spending money at all if you are not going to tell us what you are doing with it? I think it is absolutely wrong. What about this whistle-blower thing and the 15 per cent award when the minimum of $100,000 is collected? Is that Canadian currency?

Mr. Bigonesse: Yes, it is.

Senator Moore: It is collected from what kind of accounts? I do not know if you said only international accounts. I did not get that part.

Mr. Bigonesse: It is in relation to international non-compliance.

Senator Moore: Chair, I am not pleased with that at all, not being able to know the numbers of files. I am not looking for names, I want to know the number of files that our authorities are dealing with and I want to know the results of their work.

The Chair: So noted.

Senator Moore: Otherwise, I am not supporting this bill. We have to know that information. That is fundamental; they have to answer to someone.

The Chair: We will consult and get advice on the subject. Thank you.

Senator Nancy Ruth: Thank you for being here. I am going to come at this another way. If you have 800 to 1,000 people, some of them were doing this investigation of who is doing what and where, and some of them must be dealing with files. How many files would each person have?

Mr. Bigonesse: I cannot confirm. Depending on the complexity of the files, we can have auditors that work on one or two files and other auditors could be working on from 10 to 15 files.

Senator Nancy Ruth: Back to the information stuff, you cannot provide information to us or others because of your confidentiality agreement. Can you provide it to other departments of government? Here is what is behind my question: If FINTRAC is collecting information they may let you know, ``Go run at that,'' or if someone in your department has looked at the Bahamas and found a corporation or individual and the same or similar company name turns up in five other jurisdictions, how do you put it altogether? Where do criminal charges come in and how do you share information with those who would prosecute criminal matters?

Mr. Bigonesse: In terms of tax criminal prosecution, I would start where the basis of the agency is: voluntary compliance. When we uncover potential non-compliance, the first thing we do is a civil audit to verify if there is compliance or not. Investing offshore is not illegal and we cannot assume that someone who is investing offshore is a criminal or has criminal behaviour. In some examples, we have identified Canadians with offshore accounts who have reported the offshore income from these assets. Therefore, we proceed with our civil audit to determine the non- compliance. If non-compliance is identified, the next step would be building our puzzle and all the information to determine the seriousness of the non-compliance. At the conclusion of our audit, when we have taken all the information, we look at the seriousness and decide whether we should penalize the taxpayer — which we have done in some cases in Liechtenstein or our aggressive international tax planning — because we have information that leads us to believe that he has committed gross negligence. Now, I am not a criminal expert —

Senator Nancy Ruth: Negligence in not paying the tax?

Mr. Bigonesse: Gross negligence in not paying the tax. I am not a criminal expert but, as you know, an investigation is more of an in-depth inquiry into potential criminal behaviour and the onus of evidence and burden of proof is a high standard per the Criminal Code. I definitely have to prove beyond a reasonable doubt that the taxpayer has committed an offence. Civil auditors are not criminal experts. If at the end of their analysis when they have gathered all the information they are uncomfortable with the seriousness, they provide the case and make a referral to our criminal investigative directorate for them to be able to make a decision if they should initiate prosecution.

Senator Nancy Ruth: Okay, so you are simply dealing with tax, not any switching of one kind of share into another kind of share or how that might affect shareholders in Canada or anything like that?

Mr. Bigonesse: In shares you talk about —

Senator Nancy Ruth: Another question I have is this: Do you track the rapidity about which money is moving? How far back in these tax treaties can you get information? Do you track the financial history of the corporation or the individual? That will tell you some of the monkey jinx.

Mr. Bigonesse: If that information is needed in order to build our puzzle and do our proper analysis when we do an audit, we will gather as much information as possible and if we need to go back a little further, we will.

Senator Nancy Ruth: If these treaties come in and they are effective so many weeks after the date of the law, is there any retroactive perspective on a case you might be interested in or is it stopped dead the day we pass it?

Ms. Brodmann: Some of our treaties will be retroactive with respect to exchange of information. I do not believe any of these are. They will be effective on a go-forward basis, unfortunately.

Senator Nancy Ruth: Thank you, chair.

Senator Massicotte: Thank you again for your patience. I have reviewed the existing legislation on FINTRAC and you are right in that the purpose of FINTRAC is to do money laundering and terrorist financing. Once they accumulate the information with that purpose they certainly have the authority to share that information with CRA, whether it is to any tax evasion or any credit they took or any manipulation of the act to their benefit.

Has FINTRAC given you many cases when, in their search for money laundering or for terrorist financing, they are suspicious that someone did evade taxes? Do you have many of those dossiers?

Mr. Bigonesse: I am not sure what ``many'' would be, but we do receive a certain number of referrals from FINTRAC. As a result of the restriction they were able to provide us with this information. We believe it was important for us to gather more information and this is why, in Budget 2013, we now have the opportunity to get similar information that they would have in terms of electronic fund transfers. This information will come directly to us so we will not need, for this particular information, to wait for FINTRAC to determine whether there is tax evasion, money laundering and terrorist financing. We will have the information ourselves to be efficient in our risk assessing, identifying taxpayers with offshore assets and offshore income, and we will be able to take proper action.

Senator Massicotte: I do not understand. Are you saying you are going to get the information directly from the banks?

Mr. Bigonesse: For the new measures in Budget 2013, as of 2015, CRA will get this information directly from the bank.

Senator Massicotte: Are you going to create another FINTRAC, another bureaucracy of 600 people to analyze and assimilate the information?

Mr. Bigonesse: We will have a team of analysts that will look at this information, but the purpose for looking at this information will not be for the same purpose as FINTRAC. The purpose will only be for aggressive tax avoidance or tax evasion. This will be the purpose for us to look at that information.

Senator Massicotte: I must say I am very surprised. I was not aware when we approved that amendment to FINTRAC that that would motivate you to create your own department. I thought the purpose of FINTRAC was to do that for you, and I thought the legislation was giving them easier authority to share that information with you, but not that you would create your own big machine.

Mr. Bigonesse: It is important to clarify that the information that will be provided to us is exactly the same information that will be provided to FINTRAC, so there will be no additional requirement from financial institutions.

Senator Massicotte: You are being very clear, you are saying you will be getting it directly, you will assimilate the information, you will do our own analysis, therefore you will be hiring a lot of people to do that for you because that is complicated. You are getting millions of transactions a day. You are talking about international transfers as well as all the other information FINTRAC is accumulating; is that accurate?

Mr. Bigonesse: We have efficient methods to do some risk assessing and to be able to identify Canadians who have large sums of transfers at the international level.

Senator Massicotte: Are you saying that is more efficient than FINTRAC?

Mr. Bigonesse: I am not saying we are more efficient than FINTRAC, I am saying that FINTRAC has restrictions on providing this information.

Senator Massicotte: In what sense? What is the limitation they have in the legislation? What is it that they cannot provide you that you must get it directly?

Mr. Bigonesse: FINTRAC will provide us information when they identify money laundering, terrorist financing and tax evasion.

Senator Massicotte: Exactly.

Mr. Bigonesse: Now, we will have the information to be able to analyze whether there is money laundering or terrorist financing, whether or not there is, we will have the information. We would not have been able to get this information from FINTRAC.

Senator Massicotte: You are talking about the legislation that got approved by the budget which now gives the government the authority to obtain that information not only for terrorist financing or for money laundering but also for tax evasion. You are saying you are going to do that. You will not let any information go to FINTRAC and they will advise when they see a tax evasion problem, internationally or otherwise, but you will create your own department to synthesize, assimilate and filter that information; is that right?

Ms. Brodmann: The CRA is in a better position to determine whether or not there is underreporting or it goes as far as tax evasion than FINTRAC. We have the information on what has already been reported. We can use the information more efficiently and effectively if we have it directly.

Senator Massicotte: How many people do you have employed to do that for you? There must be many.

Mr. Bigonesse: Again, we have tools to be able to do risk assessing. There is an electronic method to do risk assessing, so I do not believe we need that many people to be able to do that.

Senator Massicotte: We can get rid of FINTRAC, then.

Mr. Bigonesse: I am not suggesting we should get rid of FINTRAC. FINTRAC is there for specific reasons. There is the Proceeds of Crime and Terrorist Financing Act and to my knowledge this is the reason FINTRAC exists. We are not saying we will replace FINTRAC, we will not be able to replace FINTRAC, but we will have the information for our own needs.

Senator Massicotte: It is clear. I am surprised but it is clear.

Senator Black: Can you explain that once you get a tax treaty in place and it is ratified by the respective countries, in your view, is there any other tool that you require in your tool box to be effective, or is that it? Does that give you what you require to do what you need to do?

Ms. Brodmann: It certainly gives us the opportunity to get information on a request from our treaty partners, absolutely.

Senator Black: Is there any other step or tool that you require?

Ms. Brodmann: That does it with respect to our treaty partners, yes.

Senator Black: Thank you very much; that is what I wanted to understand.


Senator Hervieux-Payette: Does the request for information pertaining to other countries include a request for additional information on individuals or businesses? Am I right to think it applies to businesses and individuals?

Mr. Bigonesse: Yes, in the agreement.

Senator Hervieux-Payette: In the agreement. Luxembourg and Switzerland were singled out. As regards the other countries, it is mostly a matter of addressing other issues, such as preventing double taxation. With them, do we have provisions in previous disclosure agreements, as with Luxembourg, say with Hong Kong? Do we have the same agreement we do with Switzerland and Luxembourg?


Ms. Brodmann: Are you asking with respect to confidentiality?

Senator Hervieux-Payette: No, with respect to the process that we are initiating that will be in force when the law is passed. Now we can ask for a lot of information from Switzerland and it will be legislated. We have a treaty. Do we have the same provision in the Hong Kong agreement?

Ms. Brodmann: Yes, all of Canada's tax treaties in this bill and since at least 2007 have the international standard for exchange of information. That means we can always access bank information and there are no restrictions on what we can ask for as long as it is relevant.

Senator Hervieux-Payette: Can I interpret then that we were just behind in terms of Luxembourg and Switzerland and that we are catching up?

Ms. Brodmann: We were not so much behind as it was not really all that long ago that they both agreed to change their treaties to allow the exchange of bank information. I believe it was in 2009 that they finally agreed to do that.

Senator Hervieux-Payette: I am saying that because I am following an interesting case in France with the former finance minister, Jérôme Cahuzac. It is almost like a TV show. He turned over 600,000 euros to UBS in Switzerland, then he had some marriage problems and eventually they discovered the money that had been in Switzerland was sent to Singapore. I am using that example because I would like to know whether the people who we intend to catch in Luxembourg and Switzerland are now going to move to Singapore or other places where we do not have these agreements.

Ms. Brodmann: Actually, we do; Canada has 90 tax treaties and hopefully is soon to have a couple more. We have tax information exchange agreements with another 16 jurisdictions, and 3 that have been signed and another 11 that are under negotiation. Singapore certainly is one that is included.

Senator Hervieux-Payette: I see in the book that was prepared for us the treaties that are in force, so I suppose Singapore was part of it. From Singapore, where are they going to move? I am asking you that, because of course you have to trace.

We gave them notice: If you put your money in Switzerland, when this treaty is in place we will have the information so you had better hurry up, because it is not retroactive. We will never know if the money was in Switzerland and has been transferred to another jurisdiction where we do not have a tax treaty. That is where I have some concern. The minute we do that, not every player is playing the game with us; they will just send the money to other jurisdictions.

Why HSBC was so important is because it is a worldwide bank. They operate in almost every country in the world. It is not very difficult to push a button and send the money to a place where we will not get the information.

Ms. Brodmann: Things have really changed since especially 2008, 2009. The Global Forum on Transparency and Exchange of Information for Tax Purposes is truly a global forum. I believe they are up to 119 members now. That forum is working with all jurisdictions to make sure that they have exchange of information agreements of some sort in place, that they have the legislative and practical ability to exchange information, and what we used to refer to as a tax haven has really changed because all of those 119 countries that are members of that forum have agreed to exchange information, including bank information.

The scope for going somewhere else is really narrowing. I think people are concerned about where they put their money. There may be certain countries where they may be afraid to put their money, and I think that we have either Tax Information Exchange Agreements or tax treaties with virtually all of the countries that are of interest to Canada, or at least they are being negotiated. Some of the TIEAs are not in place yet. Things have really changed in the last four or five years.

Senator Hervieux-Payette: Hopefully, but 2015 for the implementation is a lot of time.

You were talking about budget of 2013 a few minutes ago. Unless I was sleeping, I do not think I have seen any budget. I have heard a speech on the budget but I have not seen the budget. We have a briefing on the budget on Monday night. Do you talk about the budget that we had an outline on and now we will have the details?

Mr. Bigonesse: Thank you for giving me the opportunity to clarify. I am talking about the new budget that we are including in the budget speech of 2013.

Senator Hervieux-Payette: We will see the provision in the bill next week. That is what you can confirm?

Mr. Chair, to satisfy my colleague Senator Moore and probably myself and other colleagues, why do we not have a copy of the entente de confidentialité and ask our legal adviser to tell us how far we can go?

I know that you are in a peculiar situation because you have to follow your own lawyers, but we can also ask for advice and see if we can reconcile your legal opinion with our own request. We were not looking at individuals, you understand; we were talking about more bulk information and we will see. An entente de confidentialité cannot be confidential. The fact that you have a confidential agreement is something that we feel has been signed with, as you say, our partners, and I think if we can see it, we might be satisfied that we cannot go further with our request.

If we are not satisfied, we will get back to you.

The Chair: That is fine. We will seek that information.

Witnesses, that concludes the questions we have of you. It has been a most interesting meeting. On behalf of all of the members of the committee I thank you very much.

(The committee continued in camera.)