Ottawa politicos investigate KPMG offshore tax plan

By Jessica Bruno | May 4, 2016 | Last updated on September 15, 2023
3 min read

KPMG has been in the hot seat in Ottawa as politicians ask the accounting firm to explain its side of a dispute with CRA over clients’ offshore accounts.

Gregory Wiebe, who has worked at the firm for more than 30 years, including as global head of tax, went before the House of Commons Finance committee yesterday.

Read: KPMG should be charged with facilitating tax evasion: watchdog

On May 5, CRA Commissioner Andrew Treusch and other officials responsible for offshore tax compliance will appear before the committee answering questions on how the agency plans to combat tax avoidance.

Watch their testimony live here, starting at 11 a.m.

At the meeting, the committee will also vote on a NDP motion to force KPMG to reveal the clients to Parliament.

KPMG has been in federal tax court since 2013 fighting an order from CRA to turn over the names of clients who participated in a plan the accounting firm organized. The plan involved clients holding assets in an Isle of Man-based trust in order to shelter them from tax.

KPMG says it set up the tax plans starting in 1999. It implemented the plans 16 times for 27 clients. CRA knows about 13 of the plans, but wants the identities of the Canadians participating in the rest.

The firm was paid between $1.5 million and $1.6 million in total fees for setting up the 16 plans, or about $100,000 per implementation, said Wiebe.

Read: CRA execs party with industry players under investigation

Wiebe defended the tax plan as appropriate for the time it was created.

“The fact is, the late 1990s was a time when non-resident trusts were permitted under Canadian law, as a matter of Canadian government policy,” he told the committee. “In fact they were encouraged by the federal government as a way for immigrants with financial means to come to Canada while keeping some of their funds abroad. It was in this environment in 1999 that this tax plan was created.”

At the time, KPMG consulted with independent lawyers in Canada and the Isle of Man to ensure the plan was legal, Wiebe said.

He added that the last time KPMG implemented the Isle of Man plan in its original form was 2003, but that it executed another version of it in 2007.

Wiebe portrayed the firm’s refusal to reveal clients as an ethical obligation.

Read: CRA prepares next phase of tax crackdown

“We opposed that order on principled legal grounds because of the precedent it sets around client confidentiality, and the impact that precedent would have on our entire profession,” he said.

“If Canadians could not trust their accountants to keep their private business affairs private, there would be no accounting advice.”

Wiebe, who appeared before the committee with legal counsel at his side, also wouldn’t comment on a reported amnesty agreement between some of the firm’s clients and the CRA. He would also not say whether KPMG itself was given amnesty from prosecution, or had to pay restitution.

Tax watchdogs have called for KPMG to be charged for its promotion of the tax plan.

Read: Here’s how CRA will crack down on tax evasion

While the dispute has dragged on, CRA officials and KPMG officials have been attending industry functions – something critics say is a conflict of interest.

National Revenue Minister Diane Lebouthillier is scheduled to appear before the committee May 19.

See Gregory Wiebe’s opening statement to the committee and full testimony here.

Jessica Bruno