Hopes were high that Canadians would get to the bottom of the KPMG Isle of Man Tax scheme when the Parliamentary Finance Committee agreed to hold hearings on tax evasion and avoidance. But this week there was a setback that no one expected.
At the start of the June 7 meeting, invitees, including a prominent professor of tax law and C4TF's Dennis Howlett, got a gag order. They had been invited to talk about the KPMG offshore tax scheme, but now they could not to refer specifically to KPMG.
Turns out a last minute letter by KPMG's lawyer warned that the committee should not proceed with such testimony because it might interfere with ongoing court cases. Problem is, the "we can't comment because it is before the courts" argument has been stretched out over years. And one can't help but wonder if it is part of the strategy for the CRA and KPMG to avoid further investigation. Especially since no such gag order existed a few weeks ago when a KPMG executive appeared to give his side of the story. "That is just wrong," says Howlett,
The gag order led to some awkward and testy moments as you see in the recording of the committee proceedings.
"The particular case that we're not supposed to refer to is only the tip of the iceberg," Howlett testified after being told the committee wouldn't accept his written report on KPMG.
"I was fuming. I am still fuming about this. It is a blow against transparency and fairness." Howlett isn't giving up and intends to pursue the matter.
C4TF Board Member Scott Chamberlain also testified at the hearing. He later told CBC News that the committee shouldn't have folded under pressure from KPMG lawyers. Parliamentary committees have the power to probe any matter it feels are in the public interest, he said, whether or not there are ongoing court cases. He sent a letter to Wayne Easter, chair of the Finance Committee a letter objecting to the Committee's decision to not allow witnesses to talk about the KPMG case, which was what they were invited to testify about.
Toronto Star columnist Linda McQuaig points out that politicians in both Britain and the United States have been way more assertive.
"But, so far at least, the Liberal-dominated committee has failed to show any such toughness, or interest in aggressively probing the booming tax-avoidance industry — even after revelations earlier this week that KPMG advised clients to use its tax haven schemes to hide money from ex-spouses during contentious divorce battles," she writes. "Its tameness stands in stark contrast to the aggressive probing of the tax avoidance industry by a parliamentary committee in Britain and a congressional committee in the U.S."
In fact, Queen's University tax professor Art Cockfield told the committee that the U.S. had implemented harsh penalties and criminal convictions against KPMG for its tax avoidance schemes. Next week the committee is scheduled to hear from the former KPMG lawyer who blew the whistle on the US company which resulted in $456 million fine for creating and marketing fraudulent tax shelters. He has seen the paperwork from the Isle of Man scheme and should be able to draw some interesting parallels and observations.
The question will be whether the MPs will be listening or looking over their shoulders.