Canada's Original Think Tank

Second reading of Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting

Second reading of Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting

Second reading of Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting

Hon. Percy Downe: 

Colleagues, I have a few brief words to follow our colleague’s remarks.

Bill C-82, like other bills that have come before us, is not objectionable. I do, however, have some concerns when I heard, basically, a free-time political broadcast at the conclusion of our colleague’s speech for the great work the Canada Revenue Agency is doing. I think it’s important to highlight in relation to this bill some of the actual facts as opposed to some of the spin that we hear from the Canada Revenue Agency about the great work they are doing. In my remarks, I just want to bring that to your attention.

We have found, for example, in the Panama Papers that 894 Canadians, individuals, trusts and corporations were identified. We have found out that three years after those papers were disclosed, $1.2 billion has been collected around the world. Canadians who have followed this issue closely were not surprised but disappointed to see that the CRA has not collected a cent.

Colleagues, you mentioned the ongoing criminal investigation. You mentioned how people have been targeted. You mentioned the fairness of the tax system.

Unfortunately, there is no proof other than a collection of words that the CRA is actually doing anything. I think this bill is helpful, but it is enforcement that is lacking. That’s why I take some objection to the conclusion of the honourable senator’s speech, where a summary was obviously presented about the great work the CRA is doing.

In fact, on the ongoing targeting, we found eight or nine years ago, when there was disclosure from that one bank in Liechtenstein, where employees stole the list of all the clients that was then shared around the world, 102 Canadians had accounts. As we know, it is not illegal to have an account in a foreign bank; it is, however, illegal not to declare the proceeds from that account to the Canada Revenue Agency.

We found that, years later, the CRA justified not charging one person with tax evasion, even though they identified that millions were owed to the Canadian treasury. They did so by the argument that they were using the information to find out how tax evasion actually worked. This was the justification that they told the Auditor General in his report. In other words, they were gaining knowledge.

That begs the question — back to my earlier comment — as to why nobody has been charged in the Panama Papers. What knowledge did they gather eight years ago that they could not use in the last three years to charge anyone, when $1.2 billion has been collected around the world? Zero has been collected in Canada, not one loonie, not $5.

Again, we hear the same argument from the CRA — they are working on it. They have identified money owing. They have not collected anything. We hear that it’s complicated. Well, it’s complicated for everyone. We hear that it’s difficult. Well, it’s difficult for Australia. They have collected hundreds of millions of dollars. Even Iceland has collected $25 million owing from the Panama Papers — Iceland, a country much smaller than Canada. Australia has collected $92 million. The list goes on and on, to add up to $1.2 billion.

We have the ongoing problem of the Canada Revenue Agency talking about how tough it is and how if you cheat on your taxes and try to hide your money overseas, they will find you and track you down. None of that is true. Nobody has been charged in Liechtenstein, eight years later.

Two years after Liechtenstein, another employee in a bank in Switzerland saw what happened to the guy who stole the accounts in Liechtenstein — he received compensation for the information he provided. He stole accounts from that one bank in Liechtenstein, and 1,785 Canadians had accounts there. Imagine that — 1,785 Canadians, one bank in Switzerland. How much money? The CRA will not tell us, because a few made a commotion over Liechtenstein where those 102 Canadians had over $100 million.

It is a massive problem.

On a related issue, we saw this week something on money laundering.

I appreciate the senator’s speech. I’m supporting the bill, but I’m disappointed that the CRA continues to raise expectations, but they don’t deliver.

If that was taken out of the speech, I wouldn’t be getting up at all. I support Bill C-82, because it’s helpful if it’s enforced.

Thank you, colleagues.

The Hon. the Speaker pro tempore: Do you have a question?

Senator Coyle: Senator Downe, thank you very much for reminding us. We’ve heard you speak at even greater lengths in other contexts on this very important matter. I don’t think anybody in this chamber would disagree with you. I want to be absolutely clear when I said in my speech that “we know there is more to be done,” I completely agree with this point.

Senator Downe, you said that you support this legislation. Would you say that Bill C-82 and the enactment of the multilateral instrument will be a positive step toward tax fairness for Canadians?

Senator Downe: Thank you. Actually, no, because Canada doesn’t take any action. Other countries that signed this agreement will swing into action and do things. Canada, based upon the history of the last dozen years, will say all the right things, but when you ask them — and I urge you, senator, in three or four years, to start filing written questions and asking follow-up questions. You are bound to be disappointed at what is actually done.

Senator Coyle: Senator Downe, given the experience that you have expressed here and the disillusionment with action matching language, would you have any advice for the committee that will be studying this bill? Is there anything we should be looking at in the study of Bill C-82?

Senator Downe: Thank you. The government should be doing what they said they would. They announced there would be an investment of close to $1 billion in the Canada Revenue Agency. As of December 2017, they have only spent $110 million. The Minister of National Revenue has been talking for the last few months about all the additional auditors that have been hired at the Canada Revenue Agency. Le Journal de Montréal did an investigative report and found out that a whole bunch of auditors were retiring. And it wasn’t 3,000 new auditors hired; it was around 192.

They have to stop constantly misleading. We had the Auditor General of Canada a couple of years ago in his report talk about the call centres, where the CRA was talking about the high number of Canadians who could get through to the Canada Revenue Agency call centre. When the Auditor General examined that, he found that after a certain number of minutes, the CRA simply hung up on the caller and counted that in their positive numbers. This is the Auditor General of Canada.

They constantly get caught.

Many of us here heard representations from Diabetes Canada. They used to receive a tax credit from the CRA, and suddenly, half the people who used to receive the diabetes tax credit stopped receiving it. The CRA said there was no change in policy. At the end of day, we find there was a change in the interpretation, so the result was that people actually who were receiving it stopped receiving it. The department changed their mind.

So when they are caught, they come forward, but they continue this misleading of Canadians.

The government should be doing all the things they said they would be. Print the billion dollars right away. Hire additional auditors, because all kinds of evidence suggests that for every auditor hired, there is a multiple of six or seven of the cost of their salaries and benefits in return to Canadians.

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When Australia, for example, had the list of people from their country who had accounts in Liechtenstein — and they formed a task force right away — they ended up charging and convicting people and recovering a lot of money. The Australians tell us the other thing they found is the people who were interested in moving the money offshore suddenly lost interest when they saw friends and neighbours being convicted and going to jail.

Their enthusiasm for moving the money offshore declined rapidly. Colleagues, go on the CRA website you will see all kinds of people charged domestically with tax evasion. The CRA does an excellent job on domestic tax evasion. I have always said that. If you cheat on your taxes in Canada, you are very likely to get caught and, in many cases, convicted and sent to jail. The website is full of people. Look for the corresponding convictions, jail terms for overseas tax evasion; they are not there. That is a serious problem.

The second and last problem is the government still refuses, notwithstanding the passage of the bill in the Senate, to measure the tax gap. The government is still refusing to cooperate with the Parliamentary Budget Officer to measure the tax gap, which is the difference between what the CRA should be collecting and what they are collecting. The Parliamentary Budget Officer has been working on this for a number of years.

The new Parliamentary Budget Officer announced a couple of weeks ago that he is still having trouble getting the information he requires from the CRA to determine the tax gap. Other countries do this, the United Kingdom, even the State of California. That is how important the tax gap is. It not only tells you the size of the problem, it tells you how efficient your revenue agency is in doing their job.

The tax gap would be the first issue. Put that billion dollars in, hire the people and get going and if you convict some people, I suspect we will have the same result as Australia. We will have more money in our country for the priorities we want as Canadians, whether it is lowering taxes or investing in programs, and we will not have this double standard on the tax system.

Some Hon. Senators: Hear, hear.