Business

KPMG tax exec to testify at Commons committee about alleged offshore 'sham'

A senior KPMG tax official is set to appear before the Commons finance committee today to face questions about the firm’s $130-million Isle of Man tax scheme, which the Canada Revenue Agency has called a "sham."

Greg Wiebe not named in Isle of Man offshore tax dodge, court documents show

Greg Wiebe, KPMG tax partner and former global head of tax for the firm, will testify before the Commons finance committee today. (KPMG.com)
A senior KPMG tax official is scheduled to appear before the Commons finance committee later today to face questions about the firm's Isle of Man tax scheme, which the Canada Revenue Agency has alleged "intended to deceive" the treasury.  
NDP Leader Tom Mulcair asks Prime Minister Justin Trudeau about a CBC investigation into offshore tax shelters. 2:17

Greg Wiebe, tax partner and former global head of tax for the accounting firm, isn't named in any of the court documents filed by the CRA alleging KPMG itself earned a 15 per cent cut in an offshore tax dodge that promised multimillionaire clients they would pay "no tax" on their investment income.  

KPMG has been fighting a judge's order since early 2013 to hand over the names of the wealthy clients involved in the controversial $130-million offshore scheme that launched more than 15 years ago.

Wayne Easter, Liberal chairman of the finance committee, says members passed a motion to call on KPMG officials to explain their role in what the CRA has called a "sham."

"The pressure we're getting from the public is, 'Look, KPMG is the one named," Easter said. "That's why that decision was made."

But, Easter says, it was up to the firm to decide who would testify.

An amnesty deal CRA offered to wealthy KPMG clients was leaked to CBC News in a brown envelope. (CBC News)

None of the KPMG officials named in the court documents will appear before the committee today, but Easter didn't rule out calling on additional tax executives from the firm closer to the file at a later date.

"I don't know the partner coming forward for KPMG, but we'll hear what they have to say," he said. "If need be, there will be more meetings called. This is the initial brush."

  • Send confidential tips on this story to investigations@cbc.ca, or contact Harvey Cashore at 416-526-4704.

Dennis Howlett, executive director of Canadians for Tax Fairness, says he would like to see KPMG executives directly involved in the Isle of Man scheme to address the committee and is concerned about a possible "whitewash" if that doesn't happen.

He says he isn't convinced Wiebe has enough knowledge about who all was involved and how the scheme was orchestrated within the firm.

"We're just hoping that the members of Parliament on the committee are sufficiently prepared to not let him use it as a PR opportunity for KPMG."

In a statement, KPMG noted Wiebe's longstanding service with the firm in senior positions and says it is "extremely confident that Greg is the best person to respond to the committee's enquiries."

A KPMG tax partner will testify before the Commons finance committee to explain the firm’s involvement in an offshore tax scheme based out of the Isle of Man.

The decision to launch hearings came in March after CBC News revealed the CRA offered a secret amnesty to wealthy KPMG clients involved in the firm's tax scheme based out of the Isle of Man, a small European island between Ireland and England.

The offer, leaked to CBC News in a brown envelope, allowed the wealthy clients to pay taxes on the income they previously had not declared, plus some modest interest, and promised no civil penalties and no criminal investigations. The agency's offer came with a strict condition that clients never talk about it in public.

"Right now, we need to get information," says Guy Caron, NDP finance critic and vice-chairman of the parliamentary group hosting Tuesday's meeting. "The finance committee is actually the perfect place to get that information."

Today's committee hearing comes more than a decade after a U.S. Senate subcommittee held its own hearings into accounting firms and tax-avoidance schemes.

In the U.S. probe in 2003, politicians issued subpoenas for specific KPMG executives involved in an alleged scheme, which included the use of offshore companies. The Senate committee also issued subpoenas for KPMG's documents.

Six KPMG officials would later testify, including the firm's partner in charge of the personal financial planning division and the vice-chair of tax services.  

In 2005, the U.S. Internal Revenue Service (IRS) charged KPMG and several senior executives in the case, alleging they helped hide billions in taxable income.  Three KPMG executives were later convicted. As part of a plea bargain, the firm itself admitted to "criminal wrongdoing" and agreed to pay $456 million in penalties.

The Canadian KPMG Isle of Man tax dodge hasn't been tested in court, and no one from the firm has publicly admitted to any wrongdoing.

Difference between IRS and CRA

Bay Street tax lawyer Jonathan Garbutt says there is a difference between how Canada and the U.S. investigate tax-avoidance cases.

"I always tell clients you don't mess around with the IRS," he told CBC News in an on-camera interview in February, noting their criminal investigations officers have firearms permits.

"IRS agents have badges and carry guns. CRA officials have calculators and carry pencils."

The Commons finance committee also plans to call justice department and CRA officials to testify in its KPMG hearings. Agency officials include CRA commissioner Andrew Treusch, assistant commissioner Ted Gallivan, and Stephanie Henderson, manager of offshore compliance.

Revenue Minister Diane Lebouthillier is scheduled to testify on May 19.


For confidential tips on this story please email investigations@cbc.ca or contact Harvey Cashore at 416-526-4704, or visit CBC Secure Drop to send documents to the attention of Harvey Cashore.

Comments

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

By submitting a comment, you accept that CBC has the right to reproduce and publish that comment in whole or in part, in any manner CBC chooses. Please note that CBC does not endorse the opinions expressed in comments. Comments on this story are moderated according to our Submission Guidelines. Comments are welcome while open. We reserve the right to close comments at any time.