THE TAX HAVENS PHENOMENON OBSERVATIONS, CONCLUSIONS AND RECOMMENDATIONS COMMITTEE ON PUBLIC FINANCE MARCH 2017 THE TAX HAVENS PHENOMENON OBSERVATIONS, CONCLUSIONS AND RECOMMENDATIONS COMMITTEE ON PUBLIC FINANCE MARCH 2017 COMMITTEE ON PUBLIC FINANCE STAFF COMMITTEE CLERK Mathew Lagacé Cédric Drouin Simon Quer RESEARCH Samuel Houngué COMMITTEE MEMBERS AND OTHER PARTICIPATING ASSEMBLY MEMBERS Raymond Bernier (Montmorency), Chair Nicolas Marceau (Rousseau), Vice-chair André Spénard (Beauce), Vice-chair Ghislain Bolduc (Mégantic) François Bonnardel (Granby) Marc Carrière (Chapleau) Hélène David (Gouin) Rita Lc de Santis (Bourassa-Sauvé) Luc Fortin (Pontiac) Jean-Denis Girard (Trois-Rivières) Jean Habel (Sainte-Rose) Amir Khadir (Mercier) Gaétan Lelièvre (Gaspé) Jean-François Lisée (Rosemont) Michel Matte (Portneuf) Richard Merlini (La Prairie) Sylvain Pagé (Labelle) Robert Poëti (Marguerite-Bourgeoys) Saul Polo (Laval-des-Rapides) Pierre Reid (Orford) Alain Therrien (Sanguinet) For further information on the work of the Committee on Public Finance, please contact committee clerk Mathew Lagacé. Édifice Pamphile-Le May 1035, rue des Parlementaires, 3e étage Québec (Québec) G1A 1A3 Phone: 418-643-2722 Fax: 418-643-0248 Email: [email protected] Legal deposit – March 2017 Bibliothèque et Archives nationales du Québec ISBN: 978-2-550-78392-3 2 THE TAX HAVENS PHENOMENON REPORT TABLE OF CONTENTS MESSAGE FROM THE CHAIR AND VICE-CHAIRS .................................................................................. 7 OVERVIEW ...................................................................................................................................................... 9 FOREWORD ................................................................................................................................................... 11 INTRODUCTION .......................................................................................................................................... 13 PART ONE/TAX HAVENS............................................................................................................................ 15 Tax Evasion and Avoidance and Tax Havens ............................................................................................15 The Significance of the World’s Tax Havens .............................................................................................15 The Significance of Tax Havens in Canada and Québec .........................................................................16 OECD Tax Haven Initiatives .......................................................................................................................16 The Fight against Tax Havens in Canada and Québec ............................................................................. 17 The Fight in Canada .................................................................................................................................. 17 The Fight in Québec .................................................................................................................................18 The Fight in Other Countries .....................................................................................................................18 PART TWO/THE COMMITTEE’S WORK ....................................................................................................21 European Mission ....................................................................................................................................... 21 Special Consultations and Public Hearings ............................................................................................. 21 September 30, 2015 .................................................................................................................................. 21 Revenu Québec ........................................................................................................................................21 Ministère des Finances du Québec ........................................................................................................... 22 Éric Lauzon ............................................................................................................................................. 23 Paul Ryan ................................................................................................................................................ 24 November 17, 2015 .................................................................................................................................... 24 Autorité des marchés financiers ................................................................................................................ 24 Canadian Bankers Association ................................................................................................................. 25 Banks ...................................................................................................................................................... 25 November 18, 2015.................................................................................................................................... 26 Desjardins Group ..................................................................................................................................... 26 Julien Frédéric Martin ................................................................................................................................27 May 12, 2016 .............................................................................................................................................. 28 Raymond Chabot Grant Thornton ............................................................................................................. 28 KPMG ..................................................................................................................................................... 28 May 19, 2016 .............................................................................................................................................. 29 PricewaterhouseCoopers ......................................................................................................................... 29 Deloitte ...................................................................................................................................................30 Ernst & Young ..........................................................................................................................................30 September 15, 2016 ...................................................................................................................................31 Marwah Rizqy ...........................................................................................................................................31 André Lareau ........................................................................................................................................... 32 ATTAC-Québec ........................................................................................................................................ 33 Alain Deneault ......................................................................................................................................... 34 THE TAX HAVENS PHENOMENON REPORT 3 PART THREE/COMMITTEE OBSERVATIONS, CONCLUSIONS AND RECOMMENDATIONS ...................................................................................................................... 35 Recommendations to Be Implemented by the Québec Government ................................................... 35 Recommendations to Be Discussed with the Federal Government ......................................................40 LIST OF RECOMMENDATIONS ..................................................................................................................41 APPENDICES ................................................................................................................................................47 Appendix I: U.S. Congressional Research Service List of Tax Havens ................................................... 47 Appendix II: U.S. Congressional Research Service List of Jurisdictions with Tax Haven Characteristics ..................................................................................... 48 Appendix III: Forbes Magazine’s List of the World’s Top Ten Tax Havens ..............................................49 Appendix IV: Key Canadian Anti-Tax Haven Measures Implemented before the March 2016 Budget .........................................................................................50 Appendix V: Transfer Pricing Documentation and Country-by-Country Reporting ......................................................................................................... 52 Appendix VI: Revised Transfer Pricing Guidance ................................................................................... 54 Appendix VII: Tax Treaty Abuse ............................................................................................................... 55 Appendix VIII: Spontaneous Exchange of Tax Rulings ........................................................................... 56 Appendix IX: Modification of the Exception to the Anti-Surplus-Stripping Rule...................................57 Appendix X: Extension of the Back-to-Back Loan Rules to Four Other Situations 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