[Recorded by Electronic Apparatus]
Wednesday, May 29, 1996
.1534 
[Translation]
The Chairman: The Standing Committee on Public Accounts will first hold a public hearing, before going in camera, to study the report of the Sub-Committee on Agenda and Procedure.
All my colleagues have a copy of the fourth report of the sub-committee on agenda and procedure. We held two meetings, on May 16 and May 27th.
.1535
On May 16th, we agreed that the sub-committee wait for the legal opinion requested from National Revenue and the receipt of a legal opinion from the Legal Counsel of the House of Commons regarding the application of section 241 of the Income Tax Act before deciding whether the Committee should hold another meeting with the witnesses heard on May 16 in relation to Chapter 1 of the Report of the Auditor General on Family Trusts.
Mr. Clerk, have all my colleagues received a copy of the legal opinion? Has it been tabled before the committee and is it now a public document.
The Clerk of the Committee: Yes, since Monday.
The Chairman: We had agreed that the committee would meet Monday to prepare its schedule; that has already been done.
We had also suggested that the committee hold a hearing today at 3:30 p.m. to table the sub-committee's report - which we are doing now - and an in camera briefing session on Chapter 11 of the Auditor General's Report.
[English]
Mrs. Barnes (London West): She can't translate fast enough.
A voice: She has a copy. She just has to read.
Mrs. Barnes: I know, but I can't hear it.
Slow down a little bit.
[Translation]
The Chairman: And we suggested the committee hold a meeting on Wednesday, June 5th, on Chapter 11 of the Auditor General's Report.
Would someone like to move the adoption of...
Mr. Brien.
Mr. Brien (Témiscamingue): Perhaps I am speaking out of context, but the report's recommendations do not set out a time frame for our review of chapter 11. People seem to want to move on to chapter 11, but I think there is still a lot of work to be done on Chapter 1. There is no mention either of what we will do now that we have the legal opinion. There are items to be passed; I do not want to adopt a report while ignoring Chapter 1, which is our main concern right now.
What about this legal opinion and Chapter 1? That is my question.
The Chairman: In any event, my understanding was that the Sub-Committee on Agenda reported only on items that had been discussed. Obviously, adopting this report does not stop you from amending it or rejecting it if you don't agree with the suggestions made by the Sub-Committee on Agenda. One of the things our committee has to do is to decide what we will do with the legal opinion. If I'm not mistaken, this committee has a motion on the floor.
Mr. Brien: Before adopting the report, I would like us to decide what we will do afterwards and what will happen to this motion. We have asked for documents. If we pass the motion, we could get more information, such as the names of witnesses or the lawyers and accountants who were involved that we might want to invite. We could decide how we want to proceed. We presented our arguments at the last meeting. I don't know whether the steering committee has dealt with the matter, but this committee could. What will we do once we have dealt with the legal opinion that supports our interpretation of this committee's powers? I am sticking to my position.
The Chairman: Let's deal with the first item in the Sub-Committee's report, which says we should wait for the legal opinion. We now have it. Have all my colleagues read it and studied it? In light of this legal opinion, what is the committee's decision?
[English]
Mr. Silye (Calgary Centre): Are you talking about the legal opinion concerning no more advanced tax rulings? What is the legal opinion you're talking about? Is it the one concerning the freezing of advanced tax rulings?
[Translation]
The Chairman: No. A problem arose two meetings ago, when Messrs. Gravelle and Dodge appeared as witnesses. Mr. Brien had tabled a motion to get the name of the two family trusts. The two witnesses referred to section 241 of the Income Tax Act.
[English]
Mr. Silye: I've read that opinion now. Diane Davidson read that opinion. I'm familiar with the opinion now.
[Translation]
The Chairman: Do you, colleagues, wish to comment on the opinion we received fromMs Davidson?
.1540
[English]
Mrs. Barnes: I just want to query whether we're dealing with that right now if all of this stuff is already in the finance committee. If it's over in the finance committee and they're dealing, as they were yesterday, with stuff that we dealt with, trying to redo it, and now they're going to do it together... In fact, they're meeting as we speak. When they're finished with their report, then we can go back if we have to deal with this issue. Otherwise I don't think we should be dealing with motions that talk about releasing a taxpayer's name now if we're not going to be dealing with the issue now on this committee because it's over in finance.
[Translation]
The Chairman: Mr. Brien.
Mr. Brien: The Standing Committee on Finance has the mandate to look into taxation of non-residents. That is a huge task, which might be very long and complex, and which has no direct relation to Chapter 1 of the Auditor General's report, except perhaps to confirm that the auditor has looked into non-residents' misinterpretation of the tax provisions.
The Standing Committee on Finance has its own agenda and must find solutions to a problem which the Finance Department says is non existent. Bear in mind that the Finance Department's auditor was here last week. The deputy minister of Finance felt there was no problem. The Finance Department told the Finance committee to solve a problem which the deputy minister thinks is non existent. There is a problem with that.
I feel there is still a lot of work to be done on that. There is a huge discrepancy between the Auditor General's interpretation of the act and that of the two deputy ministers. This matter is not yet settled and I think we should continue working on it. The role of the Public Accounts committee is to do a very detailed analysis of the Auditor General's reports. This committee provides him and us with an opportunity to thoroughly examine and oversee Public Accounts.
We cannot hide behind a committee that tries to find problems and solutions to problems the deputy minister doesn't even think exist. We must continue our study of Chapter 1 with the witnesses who were here the last time and with other witnesses such as accountants, the firms involved in the decision and those who may have had a preferential advantage because they had anticipated the advanced ruling.
There is a lot of work to do. There is a scandal that must be unveiled. Things are not always clear and I think it is out of the question that we should hide behind the Standing Committee on Finance to say we will not do our job.
[English]
Mr. Silye: I would like to second the comments of Mr. Brien and say that it is important.
Also, if two standing committees are looking at family trusts, I'd like to point out some information that my colleague John Williams, the member for St. Albert, ascertained as of yesterday. He can't be here today because he's attending a funeral, and he asked me to present these points to the committee for consideration.
The Standing Committee on Finance has basically been asked to look at the tax treatment of capital assets, residents, non-residents. That's looking forward, so let's let them continue that. Let's let them look at their new laws and their new ways of capturing tax and making sure the Canadian government gets its fair share.
This public accounts committee should be reacting to what the Auditor General has put forward and I think we should be looking into the past. What happened in the past? Why was an advance ruling in 1991 kept a secret? Why wasn't it shared with all taxpayers? I think that looking into the past allows this committee to have the same item on its agenda - family trusts. This committee would be looking at it in terms of the past and the ruling in the past and what happened there.
The finance committee is also going to be putting off a decision until the fall. It's going to be dragged out for a long time. I think our role here in public accounts is to react a lot more quickly to the comments and the auditing of the Auditor General. The fact that the Minister of National Revenue has now frozen all future advance tax rulings in this regard is basically denying some Canadians the opportunity to do what other Canadians were able to do.
We have some conflicting evidence, as Mr. Brien has pointed out. The deputy minister from Finance says there is no problem; the deputy minister from Revenue at one point said that they advised against the ruling in favour of the individuals in transferring the assets within the trust. So it would be nice to review what happened, why there was a conflict between the two departments, and why two particular family trusts were given a nice Christmas present on December 24, 1991, and no tax advisory then went out to all accounting firms across the country on that ruling. I think we should be able to question witnesses to that degree.
.1545
On that basis John has asked me, and I agree with him and hope that somebody will second this motion... Point 4 in the fourth report says that the committee will hold a meeting on Wednesday, June 5, to look into chapter 11. I would move that this committee replace that with chapter 1, and that the witnesses requested to be here would be, from the Department of Finance, Al Short, Carol Muirhead and Simon Thompson; and from the Department of Revenue, Robert Beet, Carole Gould-Toussaint and John Bentley. That way we could continue to pursue the issue of family trusts. I would like to make that motion, with those witnesses to be requested to be here.
Mrs. Barnes: We're still speaking to the first one, though, right?
The Chairman: We will deal with the first one and we will come back.
Mr. Telegdi, on the first order.
Mr. Telegdi (Waterloo): Mr. Chairman, I don't want to spend the rest of the time with this committee today dealing with an issue that's before the finance committee.
I think it's important that we put some of the discussions we have had into context. An issue was identified by the Auditor General. The immediate reaction was that we should be looking at the policy regarding this legislation. This event occurred on December 24, 1991. I think our friends in the opposition would be in a good position to ask their former colleagues in the Conservative Party if they know anything about the matter. They might be able to get some information there -
An hon. member: That's not the question.
Mr. Telegdi: No, no. If you do not mind...until I finish the discussion on it.
Mr. Tremblay (Rosemont): That's not an important point.
Mr. Telegdi: The fact of the matter is that if there is a problem that relates to government policy, the best place to deal with that is in front of the finance committee.
My understanding is that the finance committee, as we speak, is dealing with this issue. My further understanding is that it is probably going to be dealing with the issue until the recess and maybe after the recess. To have people from Finance and Revenue jumping from one committee to the next, and to have different parliamentarians hearing different information, I think is a problem.
I believe we should let the finance committee, to whom it was suggested to deal with the issue, have an opportunity to conclude its hearings on the matter. Once those hearings are completed and we are apprised of the discussions... We can do that from looking at the blues. I noticed thatMr. Williams was at the finance committee the other day when the issue was before that committee. I'm sure there's somebody from the Reform Party over there today. I understand, Mr. Silye, that you'll be going over to finance to deal with the issue. It seems to me that if we want to be expeditious about reviewing the policy to see if it needs changing, then we should be leaving it in that forum. It's the appropriate forum.
In terms of releasing information pertaining to any particular taxpayer in Canada, I have a great deal of difficulty with that. I have a great deal of difficulty with requesting our officials to go against an oath they have taken in the other direction. I find it incredible that anybody would be suggesting it. As far as I'm concerned, we should not be dealing with this issue.
Furthermore, I would let the committee know that the public accounts committee actually gets to deal with very few chapters of the Auditor General's report. The last thing I want to do is squander the opportunity we have in dealing with the other chapters in the report at a time when we want the finance committee to be able to get all the attention from both Revenue and Finance officials in front of that committee so we can review that policy, which has great implications for the financial affairs of our country.
.1550
So I do not support having that issue dealt with simultaneously in front of both committees.
The Chairman: Mrs. Barnes.
Mrs. Barnes: I just want to point out that when I listened to the first points, I didn't draw conclusions, and I would hope all of my colleagues around this table haven't drawn conclusions. It sounded like summations over there.
What I need to point out is that, very clearly, what Mr. Brien was saying about their dealing with very important and urgent issues has to be taken care of. We have only three and a half weeks left here. These people are there. I was there yesterday because I'm also an associate member of that committee.
Very clearly, the first two rounds, which were with the Bloc and the Reform, went exactly to the issues that you're asking us to deal with here. They were dealing with them there. Your own members were dealing with them there, and the blues show it very clearly. So both are going to end up being discussed in a very open forum of a parliamentary committee.
My position is that if you think there's something else the public accounts committee can do at the end of the day after it has had the report of the finance committee, then we'll do it; I think we should. But one committee is no more open than another.
As you've seen in the House and as you've seen in the report, you've got a huge issue of tax policy that needs to be addressed, and the faster it's addressed by a parliamentary committee on which all of our parties are represented...
The point is that yesterday there was somebody there referring to answers given at the committee here, and you knew the people around the table didn't have those transcripts in front of them. There are tax dollars here. We're doing two committees at once. We should all have appropriate attention.
My feeling right now is that the people we would like to be talking to are over in the finance committee. I know you want to go there. I know Mr. Williams was there yesterday. Mr. Loubier was there yesterday.
I think we have other chapters right now, from what I saw of your report, that are on what is being done and what is planned to be done - chapter 11 and other things - in the report and were agreed to. You want to change that, but there is something going on and we can't be blind to what's going on in the other committee. It's not on another issue; it's on exactly this issue.
I call for the question, Mr. Chair. I'm asking you whether you'd like to vote on that now.
The Chairman: There are some colleagues who want to...
Mrs. Barnes: I thought you were finished. Okay.
[Translation]
The Chairman: Mr. Rocheleau.
Mr. Rocheleau (Trois-Rivières): We must remember we have been asked to deal with a fundamental issue today, which is a very special day in the history of Parliament. Not only are we referring to the powers of the Standing Committee on Public Accounts, but we are also referring to the powers we have as parliamentarians responsible for protecting the public interest. Those powers are defined in subsection 108(3) of the Standing Orders of the House of Commons, which describes the powers of standing committees, and in paragraph 108(3)(d), it says:
- d) Public Accounts shall include, among other matters, review of and report on the Public
Accounts of Canada and all reports of the Auditor General of Canada...
If we put our committee business on hold for now and just hand it over to the Standing Committee on Finance, given the government's political will, the whole thing will just be covered up.
The Auditor General is talking about hundreds of millions of dollars in tax avoidance. That affects our constituents and translates into cuts everywhere.
.1555
The last paragraph on the first page of the legal opinion is very clear:
In this instance, the inquiry by the Committee into family trusts in Canada is the result of comments by the Auditor General in his report to the House (Chapter 1-12 to 1-26). The review of such a report is part of the Standing Committee on Public Accounts' mandate.
If we renege on our responsibilities as parliamentarians in such a situation... In any case, the members from this side of the House will not have to bear the consequences of all this.
I am appealing to the responsibility of my colleagues opposite to their constituents. A third party, namely the Auditor General, who is paid with public funds, reviews expenditures on our behalf and uncovers some anomalies. It is then up to us to go further to correct such anomalies.
If we do not do that, both our side and your side...
[English]
The Chairman: Mr. Shepherd.
Mr. Shepherd (Durham): I would like to deal with the two issues that are coming out. The first is the concept of what I consider duplication, having two committees at the same time studying the same issue.
I understand what you said, Mr. Silye, about the past and the present. I think you have a valid point. But I think the reality is that the finance committee, since they obviously now are mandated to review this whole area, will have the past as part of their mandate as well. What has happened in the past obviously is a key to how we're going to change the legislation of the future.
But the main issue, and the most important one, is one you mentioned, Mr. Rocheleau: the public interest. Public interest, to my mind, is the integrity of the income tax system. Whether you have one person's name revealed through this process or five hundred, you are contravening what I think is our responsibility as parliamentarians towards the integrity of the entire income tax system.
There isn't an income tax system in the western world that doesn't base itself on confidentiality of taxpayers. I don't care if you're the richest person in Canada or the poorest person in Canada: we cannot cross that boundary. You are talking about the trust people have in the income tax system. Indeed, a lot of people distrust the income tax system, be that as it may. But, generally speaking, our system is well respected in Canada. People disclose their information to Revenue Canada under the presumption that it's confidential. The day we cross that line is the day our whole system of revenue collection is jeopardized.
[Translation]
A Member: Point of order; he cannot speak out against the Canadian Parliament.
[English]
Mr. Shepherd: The purpose of the Parliament of Canada is not to do away with people's civil liberties. The purpose of parliamentarians is not to engage in witch-hunts. The purpose of parliamentarians is not to victimize individuals. The purpose of Parliament is to protect the rights of individuals. The day you cross that border you're doing away with your responsibilities.
I have great misgivings about some of the things that have been said here already today about disclosing names of taxpayers. That is just unheard of in our democracy, and I object to it fully.
[Translation]
The Chairman: Before giving the floor to Mr. Brien, for the benefit of my colleagues, I would like to remind you that the role of the Standing Committee on Public Accounts is not tied to any department, except perhaps to the Office of the Auditor General.
If we push that argument to its limits, if a minister were to ask his related standing committee to review a matter, the Standing Committee on Public Accounts would become totally useless, null and void.
Take the example of Chapter 7. I think it deals with the construction of a head office for the Canadian Security Intelligence Service. If the Defence Minister were to write to the Standing Committee on Defence asking it to look into the architects' fees which were double than what was expected, our committee would become totally useless.
.1600
I would like to remind all my colleagues that on May 7th, our Standing Committee on Public Accounts was given the mandate to review all matters raised in the Auditor General's Report that was tabled that same day. A letter from the Finance Minister arrived after that; so, the Standing Committee on Finances mandate arrived afterwards. That means that if you want to paralyze our committee, render it null and void, all a Minister has to do is to send mandate to the appropriate standing committee. There would be nothing left for us to do.
As Chairman, that worries me. That being said, I now give the floor to Mr. Brien.
Mr. Brien: You are not the only one who is worried. We are entitled to wonder what purpose we serve. The government spends $50 million a year on the Auditor General and, to help him in his work, it gives him the opportunity to consult parliamentarians to further his review. The precedent we would be setting would mean that our committee would become totally useless because some crafty individual could decide at some point to hand the matter over to another committee. That way, you can avoid the issue.
The inconsistency goes even deeper than that. I would like the Liberal Members to listen carefully. You say you want to study Chapter 11 which deals with tax avoidance. The Standing Committee on Finance has been given the mandate to clarify a situation and to review the tax system.
Don't try to tell me there isn't still some overlap in our mandates. You say we should not study Chapter 1 because another committee is doing the same thing, and you are suggesting we move on to another chapter, one that is also within the Finance Committee's mandate: you trade one inconsistency for another. That doesn't make any sense. Couldn't you have at least chosen another chapter and checked beforehand to make sure you didn't end up in that predicament?
Your argument won't hold water. I don't know what your cover up is nor what you are trying to hide. Why not just be open about it? I remember that Mr. Paradis - who unfortunately isn't here today - was very keen about shedding light on this situation.
I had asked for documents; I had forgotten a few and he took the time to check them. He issued a press release saying we would shed some light on the matter. The member for Brome - Missisquoi is a member from your own party. He should want to shed light on this even more than I do. Ask him. He is gone now.
Mr. Tremblay: Was the press release issued in both official languages?
Mr. Brien: I don't know; it's probably unconstitutional. Something is wrong.
Moreover, the legal opinion we received confirms that our committee has the mandate to delve very deeply into matters. If we wanted to shed light on everything that happened in 1991, we know this committee has every power to do so. The mandate of the Standing Committee on Finance is much more general and vague; it may have more difficulty shedding light on the situation.
Mr. Shepherd is concerned about the confidentiality of those who, according to the Auditor General, might have benefitted from privileged information which enables them to save hundreds of millions of dollars. The confidentiality is something I am starting to worry about less. Those people may not have worried about public interest when they asked that the legal opinion be made public. Come on.
Suddenly you were worried about costs; two committees working in parallel cost a lot of money. You don't worry about losing hundreds of millions of dollars because of two apparently erroneous decisions that didn't get corrected; that doesn't matter. But if Parliament can save from $10,000 to $12,000 and stop the opposition from doing its work, then that is acceptable.
At some point, you'll have to think things through. This makes absolutely no sense whatsoever. We won't put up with this; we won't let ourselves be pushed into that. Would you go as far as saying our committee is useless, would you put an end to its tradition of keeping it independent from departments, and would you give up the guardianship of the Revenue Department - who has been questioned the most thus far - or of the Finance Department? That way we will not do our job.
That would be unfortunate because so far we have been relatively effective and neutral. But you are trying to wriggle out of it.
We must continue our review of chapter 1 and hear witnesses. Mr. Silye mentioned a few names and I think he has others. We hadn't even finished questioning the deputy ministers because we were short of time. We are not short of work; that is our priority.
The Auditor General says hundreds of millions of dollars are at stake. Don't think for a moment that we are ready to get lost in the other pages when in fact we are dealing with the most important part of his report. The Auditor has sounded the alarm publicly often enough, saying this should be looked into and clarified. We musn't stray from our objective.
.1605
[English]
The Chairman: Mr. Hubbard.
Mr. Hubbard (Miramichi): Mr. Chairman, going back to what I said at our last meeting, I continue to be very much concerned that many Canadians are faithfully paying taxes - weekly, monthly - to this country, and they're being collected by our department on a basis on which we expect all Canadians to contribute. We're continually concerned that Canadians pay too many taxes, yet we come to this family trust thing we've been talking about, which the Auditor General has brought to our attention, and we're told, all across this country through our papers, that certain major family groups in this country are taking millions of dollars out of Canada to other places, whether it be the United States or tax havens, and it's not being taxed by Revenue Canada.
The Auditor General has made a report in terms of what happened in 1991. I know our finance department will look at ways to clear up this issue so that we will not encounter problems from the past. But our Auditor General doesn't deal with the future; he deals with the past. Our job as members of this committee is to look at past actions, to review them, and to bring evidence to Parliament that will enable us to improve the laws of this country so that this will not continue.
We have a problem here in terms of going back home and talking to people. I did that last week with our local newspaper editor at home. They are very much concerned about tax loopholes.
I asked certain questions of both the Auditor General and the Department of Revenue. The deputy minister has given answers to some of those statements, and it certainly doesn't reflect the answers he said were going to come.
I'm not familiar with family trusts. I've tried to look into that in the last few days, and I don't have all the ways that I should be able to be knowledgeable about here today, but I do feel there are some very serious problems dealing with this.
I feel also in terms of what happened in that department in December of 1991 that certain decisions were made without the proper backup, that certain lower officials did not condone or did not support the decision that was ultimately reached almost at Christmastime of 1991.
I'm not sure how we're going to handle this or what we're going to do with it, but we can't overlook it. We can't walk away from it. It's a very important issue. I've written a letter to the Minister of Revenue saying we must curtail the movement of family trust money out of this country until a decision is made. We have a ruling, but rulings decide, in a precedence matter, what can happen after one ruling is made. Right this very day money could be leaving Canada on the basis of that 1991 ruling.
If money is made in Canada in terms of Canadian corporations... I sometimes buy shares. I pay my capital gains on them. Every family trust in this country that has money being taken out and capitalized should be forced to pay the same rate of taxation, the 75% of the capital gain, as I would as an individual in this country. If we can't assure Canadians that this is going to happen, if we can't assure them that our system is fair to everyone, we as a Parliament cannot continue to run this country effectively.
I say to the hon. members today that I feel very strongly on this issue. I feel we have to get into the guts of the matter and decide what went wrong. If people did make a wrong decision, we have to look at that. Maybe it's a matter for Justice rather than Revenue Canada. It is a very serious matter when $2 billion leaves Canada and other moneys can leave as a result of that ruling.
So let's put it on the table, let's get at this issue and show Canadians for the summer, when we go home in July, that we have certainly done our part as parliamentarians to clean up this issue.
Thank you, Mr. Chairman.
[Translation]
The Chairman: Mr. Tremblay.
Mr. Tremblay: Mr. Chairman, I would like to speak to two points.
The first is the partisan inferences. That decision was made in 1991, and at the time, the Liberal government was not in power. The work of this committee has nothing to do with partisanship. The minister gave that answer in the House, to give the impression she had nothing to do with it.
The work we have to do here has nothing to do with the current government and partisan policy.
If, per chance, an inquiry proved to be useful, then the Justice Minister will organize it, or else the Auditor General will be asked to do an audit.
I would like to just get on with our work and forget about partisan comments, because that happened in 1991. Our responsibility now is to do the work we have to do, namely to review the Auditor General's report.
My second comment is on the legal opinion we received in response to the committee's questions and the names. I can understand why you might totally disagree with asking for names. I can understand that. But what I don't understand and what I don't accept is that you don't understand that it is this committee's privilege that is at stake.
.1610
The legal opinion simply states that the committee does serious work and has all the powers one could possibly have. I have heard some people say that what we do is unparliamentary and does not meet Parliament's objective.
The legal opinion we have is based on parliamentary privileges. So you musn't start denying parliamentary privileges and this committee's privileges. You may not approve of asking for names, because that is another matter, but this opinion sets out all the powers we have as a committee, and they do not necessarily apply to all committees.
The Natural Resources Committee cannot go and see the Auditor General to ask him the same questions as we do. The House of Commons has given us the mandate to cooperate and you have the confirmation of our powers right in front of you. I think that is sufficient reason for this committee looking into what happened in the past.
I know the Finance Committee has work to do, but the Auditor General has basically told us he does not agree with the interpretation of the Act that was used to make this ruling and he continues to tell us that. Besides the names, what has the Deputy Minister of Finance told us? The Deputy Minister of Finance tells us the ruling was very simple, but that the transaction was far too complicated. Are they telling us that to enlighten us or to explain the transaction to us?
The Deputy Minister of Finance and the Deputy Minister of Revenue know this committee has powers. If the Auditor General tells us we can find out everything and settle this matter without knowing the names, perhaps we should reconsider a few things. However, everyone around this table must recognize that this committee has all the powers it needs, and that it is the only one to have them. We will therefore need the information because the Auditor General's decision to include that in his report does have some major consequences. It is not just a footnote. The Auditor General repeatedly stressed the urgency of looking further into this matter.
This is not new legislation. The interpretation dates back to 1991. Some expert lawyers or accountants arranged the transaction and know that the interpretation dates back to 1991. Yesterday, the Deputy Minister of Revenue confirmed that others may have been doing the same thing for years. It is therefore important that this committee consider the extent of its privileges. If you want to change the parliamentary privileges, then say so and let's go to the House of Commons.
We didn't design this committee's privileges. They were established through parliamentary tradition. The reason we have them is because it is important to protect public interest. We had that confirmed. The rest is open to discussion. But for goodness sake, let's not deny this committee of the powers that it needs to be effective.
[English]
The Chairman: Mr. Telegdi.
Mr. Telegdi: Mr. Chairman, there's no question this matter is being dealt with. It's being dealt with right now, as we're arguing over process, by the finance committee in a public forum, and that's something both the Bloc and the Reform pushed for. It is taking place, so we are not trying to hide anything that's occurring here at this committee.
What we are trying to do is to make sure that the investigation is done as expeditiously as possible, because there's a time line involved. I believe we agree on that. If we want to see this matter resolved, don't encumber the finance committee in being able to hold meetings with those people, because those people have to come to this committee.
I believe we all want to deal with the issue. But if we don't take this to its logical conclusion, we could have it over at Justice, we could have it over at the Solicitor General as well, and, who knows, we might even be able to get it over to the Minister of National Defence.
.1615
What I'm concerned about is that we have other issues on the table. When we're talking about stopping the rip-off of the taxpayers' dollars and we're talking about doing justice to the Canadian people, I say that we have to be dealing with those other issues.
We had the whole issue on the moving, Mr. Brien, that you did not wish to support in terms of calling in extra witnesses; neither did Mr. Williams. The fact of the matter is that this issue is being dealt with right now, and we have other issues, as a committee, to deal with.
At the end of the day, when the finance committee has finished dealing with the issues, there's nothing to stop this committee from having the Auditor General in; there's nothing to stop this committee from reviewing what has taken place at the finance committee and following up from there. But to do two simultaneous investigations on this issue doesn't serve our purpose well, it doesn't serve Parliament well, and it certainly doesn't serve the taxpayers of this country well.
So I think we should move to a vote on this, Mr. Chairman.
The Chairman: There's three colleagues who want to speak: Mr. Silye, Mr. Shepherd andMr. Williams.
Mr. Silye.
Mr. Silye: Thank you, Mr. Chairman. I would still like to stand with the recommendation that we spend June 5 on the family trust. With all due respect to the comments made by Ms Barnes and Mr. Telegdi on having simultaneous hearings taking place on the same issue, it is not simultaneous; it is not the same focus.
You yourself as chairman pointed out that the mandate of the public accounts committee is to verify and to look into those aspects of an audit that the Auditor General points out. That's the main purview of this committee.
As Mr. Hubbard pointed out, I don't know why this went over to the finance committee. Why isn't this investigation and the review being done here, and why doesn't it remain here? Who ordered it to go over there?
You say a letter was sent, but I don't think we should give up on this committee controlling its right to review this. What we should be reviewing is the Auditor General's comments. That's dealing with the past, that's dealing with how it happened, why it happened, why there was a difference of opinion between Revenue Canada and the Department of Finance. The Auditor General pointed this out. It's our job to find out the details of this, and that's why we have a right to ask for witnesses.
So we're not here to set the policy. The finance committee is going to set the policy. They're going to set the new ground rules for capital gains, residents, non-residents and the transfer of assets or capital, or the flow of capital to the States, and all that stuff. And their review is going to focus on the future, on closing a loophole if a loophole exists. That's what they're going to be doing.
If we really want to do the Auditor General some justice, we should be looking into what he's pointed out and look at the past.
That's why I see a difference, Mr. Telegdi. And I do respect your point of view. I would hate to see two committees wasting the time of these people, but I don't think the finance committee is headed in the same direction and has the same mandate we do.
Two pressing issues are at stake here. It's not a good practice for the revenue minister right now to freeze all future tax avoidance rules. If the deputy minister of the Department of Finance who made this ruling - he was there in 1991 - and the deputy minister of the Department of Revenue both claim that nothing was done wrong in the past, that it just exemplifies the illusion of a double standard and there's nothing being done wrong now, then why are we denying this from going forward? If there's been nothing done wrong, fine. If it's a loophole we want to change, that is the purview of the Department of Finance to change it. Let them change that rule; let them close that loophole. Our job is to find out what happened in the past.
So the question is why Revenue Canada or the Department of Finance, having given an advanced ruling...and I'm not personally interested, or the Reform Party, in the names of the individuals. We're not interested in the names, who it was. Leave the names out of it. What we're interested in is the ruling.
As a businessman, and as a politician now, my biggest concern is why, if there was some kind of ruling given, there was no tax bulletin issued in 1991 to all the accounting firms and the tax lawyers across Canada so that they could give that same tax advice to their clients. That's a major issue here. Who is responsible for not setting that out? We have to find that out.
The loophole is another item. Someone in the two departments should be accountable for this. We're not on a witch-hunt here. We just want to know what happened, why, and who has the authority. Is it the Department of Finance or is it Revenue Canada? If Revenue Canada has the laws, they apply the laws, and they say you don't qualify because you don't have this or that, then this shouldn't have happened. Why did the Department of Finance get involved again? Apparently the appeal then was made from Taxation and Customs back to the Department of Finance.
.1620
So these are issues that are not going to be resolved in the Department of Finance. They're not going to explore those. They're not going to go into those. I know Jim Peterson has said all they're going to do is look at the loopholes, look at closing them down. Even now the Deputy Minister of Finance is saying, okay, you parliamentarians, you Department of Finance, you people on that Department of Finance...whatever new law you do to close this loophole or whatever, be careful not to restrict the mobility of capital. That's his advice.
So they're focused on another direction. They're focused into the future. What I'm saying is, this committee should focus into the past. That's why I'm suggesting this committee put - and keep - family trust on this committee's agenda. Let the finance committee do what they want. Let them have the argument we're having here. Let's take the lead and let's have chapter 1 reviewed in this committee.
That's it. Thank you.
The Chairman: Mr. Shepherd.
Mr. Shepherd: I'll just quickly deal with two points. One was Mr. Tremblay's concern about privilege, and the privilege of parliamentarians. I think maybe he misunderstood. Obviously parliamentarians have the right to investigate these matters, but I was talking about how you utilize that investigatory right.
I heard from Mr. Brien what I would believe to be an inept use, almost a prejudicial use, of the rights of privilege. If you take away the rights of one or two citizens, you take the rights away from all of them. I heard Mr. Brien clearly state that he didn't care about that, that he didn't care about whether he exposed the rights of two or three people. I'll tell you, that's not acceptable, and that would be a misuse of parliamentary authority.
Second, there are some good points on both sides of this issue, but we heard Mr. Hubbard say he didn't understand the family trust system. Indeed, I guess I look at it from a more practical point of view; that is, how are you going to get all of these parliamentarians on the finance committee and on the public accounts committee up to speed to actually understand how that tax system works in the first place? You are dealing with a very complex area of taxation law. If you want to solve the problem, it seems to me, you get one committee with one focus up to speed and deal with it, but to duplicate that process...
I guess the next question that comes along with that is, what is the appropriate committee? Clearly it's an area of finance policy, of taxation policy. That's the problem, right? Why is it there are family trusts in the first place? What is their purpose, and what is the effect they have on the taxation system? This issue we're talking about is bolted onto that - how somebody can get a quick tax ruling and so forth. But I think there's a broader issue, which in my mind is clearly finance.
In summary, I think you're going to be duplicating. I don't think you'll get to the bottom of this issue. Maybe all of us could pack our bags and go to the finance committee and do the same thing over there. What difference does it make?
[Translation]
Mr. Brien: Mr. Chairman, I would like to refer to what I said earlier, because no one from the Liberal Party responded when I said we wouldn't study chapter 11. It deals with tax evasion and that is also part of the Finance Committee's mandate. So why do you want us to look at chapter 11 today? We will be having a technical briefing on a chapter that is not worth studying, since according to your comments and those of Mr. Shepherd, the Finance Committee is going to look into that matter and is in the best position to make recommendations on what should be done with technical and complicated questions.
So we are completely useless: we are good for nothing, we read documents, we listen to the Auditor General, then we go home and that's it. That's nonsense. I don't know how you could tell your constituents what you do on the Public Accounts Committee. I know I would have a lot of trouble explaining it to them.
So the argument used in chapter 11 is no longer valid. If we don't look at chapter 11, we can't look at chapter 1 either, and if we do not look at chapter 1, we can't look at chapter 11.
.1625
Someone from the Liberal Party said earlier that the Finance Committee was going to conduct an inquiry. That is not part of its mandate. Its mandate is to find solutions to a problem which, according to the Deputy Minister of Finance, does not exist. Bear in mind that the Deputy Minister, Mr. Dodge, told us there was no problem and that the legislation had been interpreted correctly. I wonder why you expect the Finance Committee to find solutions to a problem which, according to the Liberals, doesn't exist.
Personally, I am quite sceptical about the outcome of the solutions put forward by the Liberal majority at the Finance Committee. Later on, my colleague will talk about the relationship between the committee and the department.
Let's face the facts. We received documents and you can't convince me you don't want to glean more information from the legal opinion we received from the Justice Department dated a few days prior to December 21, on the 19th of December, to be precise. In the conclusion of the draft legal opinion we had asked the Justice Department to submit, the author said:
- In my opinion, the Act is ambiguous on that. However, given the general economy of the Act, I
share your view that only a non-resident could dispose of a taxable Canadian property under the
determinative provisions of paragraph 85(1)(i) of the Act.
But on December 23rd, we ended up with a very costly interpretation of the Act and we can now seriously wonder what happened prior to that interpretation, which, I wish to remind you, still exists. Even though advance rulings are no longer possible, existing ones can be used as jurisprudence. So for now, the interpretation is the most generous and allows the same situation to recur, not only for family trusts, but also for the general taxation of capital gains of non-residents.
There's a lot of money at stake, and the Auditor General, who as a rule does not exaggerate, says the potential losses may be in the order of hundreds of millions of dollars.
You say there will not be any further inquiry into the nebulous interpretation of the Act, which is such a generous one. I can't understand how you could let that go by saying that the Finance Committee, which is no doubt no more competent than ours, will eventually find solutions.
So I am quite surprised at you, Mr. Shepherd. Since you have already sat on the Finance Committee and you are now here, it means we should be as competent to find those solutions, or at least be able to shed some light on this matter.
In fact, it's quite normal that there was some overlap at the outset, because in order to understand the situation properly, they had to familiarize themselves thoroughly with it in order to be in a position to find acceptable solutions.
But the mandates are somewhat different. Some have to find solutions and our role is to try to shed light on the situation. However, many things remain unexplained. We didn't have these documents when we spoke to the officials last time, and the Auditor General asked us if we had found the draft legal opinion interesting.
Indeed, we did find it interesting, but I would have liked to have been able to question the Deputy Minister to know what happened in the ensuring days. There are documents that we don't have yet and that we would need in order to find out who attended meetings and so forth. You won't convince me that that's the mandate of the Finance Committee. When it finds solutions, it will not be interested in knowing who attended a meeting in 1991. Far from it.
We therefore have to face facts. I think that our mandate is very clear. What committee is in a better position to shed light on this? It's obvious that it's the Public Accounts Committee, which has jurisdiction over everything relating to the Auditor General's report, because this is the forum he's always used and this is where he comes to express his opinions. As my colleague said earlier, that legal opinion gives us a lot of power and we have to know where we're going and how far we can go to obtain information if we really want to shed light on this.
I'm very happy to see that a member of the Liberal Party seems prepared to want to shed light on the matter, and it is my fervent hope that you will revisit this proposal. If you can't do so today, please consult the leadership of your party and come back to us tomorrow, but it is unacceptable that we stop here when we must absolutely shed light on a catastrophic situation.
.1630
We musn't be afraid of words. Compared to this, the story of the move is peanuts. You will have to justify your decision to the public if you don't want to shed light on a situation like that.
I'll stop here for now, Mr. Chairman, but I hope that my Liberal colleagues will say that they've changed their minds and that they will finally accept that we replace the fourth paragraph of the recommendation and proceed with an examination of chapter 1 next week, without necessarily limiting the number of witnesses. We could continue with those who previously appeared.
The Chairman: With regard to the motion, Mr. Silye has left the room.
Mr. Brien: Yes, but I will second it or even move it.
[English]
The Chairman: Mr. Telegdi.
Mr. Telegdi: Thank you, Mr. Chairman.
Mr. Silye left us to go over to the finance committee to talk on this issue. Let me just repeat that we have policy and process in play. The finance committee is dealing with the policy, and looking at the finance committee minutes from the other day, they are also getting into process.
At the end of the day, when the finance committee finishes their hearings...
If you don't mind, Mr. Brien, I gave you the courtesy of speaking without interruption and I would like the same courtesy extended to myself.
When the finance committee finishes their investigation on this issue - and I repeat that if there is abuse taking place, they are the ones who will have to deal with it, who will have to change policy - and have taken whatever actions they have taken, we will have had the Auditor General back to our committee and had the opportunity to review what the finance committee has done, and if at that point we want to hold further hearings, we can.
It doesn't abandon the process, in my mind it expedites the process, and I think that's what the taxpayers of this country would want us to do. I think it's important. It was the Bloc member on the committee who pushed to get this thing in front of the finance committee. I understand that he boycotted meetings at the finance committee to get this matter before that committee, and they have it. There is absolutely nothing to stop anybody from being there.
In terms of explaining to my taxpayers what has happened and why we're not concentrating on this particular issue, we have all sorts of issues to concentrate on that are not duplicating anybody at the present time. We have all sorts of things.
Remember, Mr. Brien, you saw that television program that showed Canadian taxpayers being ripped off and RCMP officers saying that fraud is taking place against the government, and you chose not to go any further with it. So don't lecture me in terms of justifying things to our constituents.
Mr. Brien: We cannot make a recommendation on that.
Mr. Telegdi: Mr. Chairman, my final question is to you. At what point are we going to a vote on this?
Mr. Brien: Never.
The Chairman: There are some colleagues who want to speak again on this issue.
Mr. Telegdi: To the clerk, do we continually - ?
The Chairman: The answer is yes.
Mr. Telegdi: So we're going to continue to waste our time here.
The Chairman: The answer is yes, because we are a democracy.
Mr. Rocheleau.
[Translation]
Mr. Rocheleau: Mr. Chairman, I won't hide the fact that I find that what our colleagues opposite are doing is very strange. If you look at the chronology of events and you refer to December 23, 1991, you will see that all the opinions expressed until then, be it from the Department of Revenue, the Department of Justice or the Auditor General at the time and today, judge the situation in such a way that the position regarding the request made to the tax department was negative.
One intervener appears in the affair and that's the Department of Finance which is capable of changing a decision and take action so that the negative attitude becomes positive. In that way, the Treasury is deprived of millions of dollars and to use the Auditor General's words, the general intention of the legislator was "frustrated".
.1635
Having said that, today, the government side is recommending that the analysis, examination and inquiry be handed over to the Finance Committee which will proceed upon request of the Minister of Finance, who is directly involved and therefore in a conflict of interest situation. If there is one place where this kind of issue should not be referred to today, it's the Finance Committee, since the instigator of the Finance Committee, the Minister of Finance, who's already asked the committee to proceed, is directly involved and is therefore in a conflict of interest situation regarding this matter.
Personally, once again, I'm calling upon the sense of ethics and moral responsibility of each of our colleagues here present. The public interest is at stake and we have to rise above partisanship, even if that can be disturbing. It's our responsibility as parliamentarians and elected officials that is at stake today.
We have the privilege of sitting on the Public Accounts committee and we should use that privilege to act wisely, not with spite and aggressiveness, but cooly and efficiently. Personally, I hope that the outcome of all this will be positive because it's the very future of this committee that's at stake.
As one of our colleagues said earlier, whether it's a matter of justice, cultural wealth or Canadian heritage, if Heritage Canada is called before the Auditor General, it will tell its committee to deal with the issue and it will be total anarchy. That committee will therefore totally lose any meaning and basis in reality.
My conclusion is therefore that we certainly must not refer this to the Finance committee because the Department of Finance is in a conflict of interest situation regarding this matter.
The Chairman: Mr. Tremblay.
Mr. Tremblay: Earlier, it was said that Mr. Silye had served on the Finance committee. I think he expressed himself very clearly. He stated that essentially, these people must be accountable for those decisions.
There are people who have responsibilities, who must account for decisions that were made by the very fact that this was made public in March 1996. There are people who would have had access to those decisions for years. And there is a whole series of processes and procedures that are not part of the Finance committee's mandate at all.
The Finance committee has no mandate to review the series of rules concerning the issue of the taxation and fund transfer by non-residents. I will concede that the past couple of meetings, they have examined family trusts in-depth because that's part of the reason why the minister of Finance asked the committee to accelerate its work on that.
The work of this committee, with the powers it has, is to ensure that everyone understands the situation properly. The act has been interpreted in a way that the Auditor General finds contrary to the legislator's intent, and that interpretation has huge consequences. Hundreds of millions of dollars are at stake.
That's the situation that this committee must consider. I think that beyond the new policies that the minister of Finance will have to consider, we must question the whole decision-making process and the way various cases are treated. If the Public Accounts committee does its work quickly and that besides, the Finance committee reviews the series of policies regarding non-residents, we will accelerate the process and ensure fairer treatment for all.
But I am at a loss. The whole issue of fairness in the tax system is at stake in the case that the Auditor General has presented to us. This is not a haphazard remark. It's a very well documented and very serious case, and I don't understand this decision to not broach clearly the responsibility of this committee.
.1640
[English]
An hon. member: Are we ready for the question?
The Chairman: I think so.
Mr. Brien.
[Translation]
Mr. Brien: On a few occasions, I heard this argument that it would be faster to let the Finance committee do what it wants. I can talk to you in French or English if you prefer.
Ms Barnes: It's not the same thing.
Mr. Brien: I will do so a little later because I will need some time to state my position. This time, I want it to be clear and I want my position to be well understood.
We are faced with a situation where on two occasions, the government has lost enormous tax revenue following a decision that's controversial, to say the least, and that was raised by the Auditor General, who continues to maintain that that decision is controversial.
To find a short-term solution to the problem, if the government's position was serious, they would make sure that the advance ruling will no longer bind the Revenue Department in the future.
[English]
Mr. Telegdi: I have a point of order, Mr. Chairman.
I move a motion for adjournment.
[Translation]
Mr. Brien: Vote on that.
[English]
Mr. Telegdi: You have abused the process of this committee.
[Translation]
Mr. Brien: Is he allowed to interrupt me while I'm speaking?
[English]
Mr. Telegdi: You will not hold us. It's not debatable.
[Translation]
The Clerk: No, he's not supposed to interrupt.
[English]
Mr. Telegdi: It's a point of order.
[Translation]
The Chairman: Perhaps we should check the rules, but the clerk tells me that a member who is speaking cannot be interrupted.
[English]
Mr. Telegdi: I have a point of order. That's why I raised it on...
[Translation]
The Chairman: All right.
Mr. Brien: Mr. Chairman, it's quite clear to me that you will adjourn. I don't think that's a bad idea and I will put my name down again.
[English]
Mr. Telegdi: Mr. Chairman, a motion has been made to adjourn. I don't want to see the process abused any further. It's not debatable. We have been abusing the process now for the past hour.
[Translation]
The Chairman: Citation No. 318, paragraph (2) of Beauchesne stipulates that a member cannot rise on a Point of Order to move a motion, except for a motion that a member be now heard. Therefore, Mr. Telegdi, I'm ruling that in accordance with Standing Orders, you cannot do what you wanted to do.
However, there is a roundabout way to do this. Ms. Barnes could ask that you be heard for your motion. That's the interpretation the clerk has given me, except for a motion that a member be now heard.
[English]
Mr. Tremblay: That's the process. You do it that way next time.
.1645
[Translation]
Mr. Brien: If you don't want to do this, I'll let you adjourn.
I was telling you that I will put my name down again. You can therefore speak between my two interventions, and then you will adjourn since that seems to be what you want to do in any event.
I will stop here and put my name down for later.
We can vote on that.
The Chairman: You're requesting a recorded division?
Motion carried: Yeas, 5; Nays, 2
The Chairman: This meeting is adjourned.