Third reading of Bill C-15, An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measuresPublished on 21 June 2016 Hansard and Statements by Senator Percy Downe
Hon. Percy E. Downe:
Thank you, Your Honour. I want to talk about the issue before us and indicate that there are many things in the budget that I support, but I’m particularly pleased that Senator Harder highlighted this in his comments, but I want to expand on it.
The government has decided to put an additional $444.4 million in the Canada Revenue Agency to assist with overseas tax evasion, an issue that I’ve been working on for many years, as many of you know as you have had to listen to my long speeches. I am pleased that the government has appointed a five-person expert panel to advise the department, because in my opinion the department needs a lot of advice.
Additionally the government is hiring thousands of new employees. Normally when you hear that the government is hiring thousands of new employees, you think of the cost; but in the case of the Canada Revenue Agency, every auditor hired returns 7 to 10 times their salaries and benefits in additional revenue they collect that is owing to the Government of Canada and the citizens of Canada.
The government has also set a target, with their $444.4 million in additional funding and with their additional employees, that they will recover $2.6 billion in overseas tax evasion over the next five years. That’s a significant number, but I believe the department will have no trouble obtaining that amount and will likely obtain much more.
The reason I say that is because in 2005 the government put a one-time injection of $30 million into an aggressive international tax unit at CRA, and that had, over seven years, a fiscal impact of $4 billion. Significant funds.
I originally became interested in this issue when I read in the newspaper in 2006 that an employee of one bank in Liechtenstein stole the information of everyone who had accounts in that one bank, and that information was eventually purchased by the Government of Germany, and they shared that information with governments around the world.
In March 2007, the Government of Canada received information on the 106 Canadians who happened to have accounts in that one bank. As we all know, it is not illegal to have accounts overseas; it is illegal not to declare the proceeds from those accounts.
What the Government of Canada discovered was that those 106 Canadians had over $100 million invested in that one bank. The sad news for those of us who follow the CRA is that eventually, in April 2012, the Canada Revenue Agency identified that $16.5 million was owing to Canadians in taxes and interest on that $100 million.
A year later, another employee stole information from the bank he worked in in Switzerland, and that one bank had 1,785 Canadians with accounts.
That gives you an indication of the degree of the problem the CRA was fighting, and they were falling dramatically behind because they lacked the resources. They were losing employees to accounting firms and law firms who were paying a lot more money. The government could not retain employees who had been with the department for many years. They were at their peak value to the government, and for the same reason, the private firms wanted to hire them.
The experience in Canada was very different than other countries around the world. Australia, getting the exact same information in 2006 that Canada received in Liechtenstein, immediately swung into action, formed cross-department committees, identified targets. They hoped to recover $603 million; they eventually recovered $985 million. They charged a host of people; people were fined and people were sent to jail.
What the Australians found was the more publicity, the more criminal charges, the more convictions, the less interested people were in overseas tax evasion. When they saw their neighbours convicted, names and pictures in the paper, their enthusiasm for saving money declined rapidly.
The Australians not only recovered a large amount of money owing, they prevented a lot of money from leaving the country. And compare that to Liechtenstein, which we spoke about earlier, those 106 Canadians, which the government determined years later owed $16.5 million, not one of them was charged or convicted. It is this double standard between overseas tax evasion and domestic tax evasion that goes to the heart of the problems of the Canada Revenue Agency.
If you’re trying to avoid taxes in Canada, and you live here domestically, your chances of being caught, charged and convicted are extremely high. And anyone can go on the Revenue Agency website and see Canadians who have been convicted and charged. What you will not find on the website is one conviction for overseas tax evasion. I would argue that is because of a lack of funding. That’s why I’m pleased that the government is putting so much money in this budget to fight overseas tax evasion.
They also made a commitment to study the tax gap, the difference between what is owed to Canadians and what we actually collect. A host of countries around the world — the United States, the United Kingdom and Turkey — estimate the tax gap. Even the state of California estimates their tax gap.
The Government of Canada has refused to do it. The Canada Revenue Agency has been uncooperative, to put it mildly. I requested the Parliamentary Budget Officer four years ago to estimate the tax gap. He was in touch with the revenue agency and they refused to cooperate. They won’t provide the data. I want to emphasize that we’re not talking about personal information. We are talking about raw data which could be used to estimate the tax gap.
The department refused constantly to support the PBO. Under the new government they are now attempting a tax gap analysis on the GST, which I understand they’re going to release in the next couple of days.
They are still shying away from a tax gap on the international overseas portion, but we’ll give them time. The minister made all these announcements on April 11. A year from those announcements, I will be asking the government for an update on what they actually have done compared to what they’ve promised.
This is a tremendous beginning. For that reason, and many other things in the budget, I’ll be voting for it.
Thank you very much, colleagues.