PACP Committee Report

David Christopherson
Chair
Standing Committee on Public Accounts
House of Commons
Ottawa, Ontario K1A 0A6

Dear Mr. Christopherson:

Pursuant to House of Commons Standing Order 109 on behalf of the Government of Canada, I am pleased to provide the Government’s Response to the recommendations of the Fifth Report of the House of Commons Standing Committee on Public Accounts concerning Chapter 9, Offshore Banking-Canada Revenue Agency of the Fall 2013 Report of the Auditor General of Canada.

I appreciate the important work undertaken by you and the Standing Committee to study the Auditor General’s findings on whether the Canada Revenue Agency (CRA) conducted compliance actions adequately for taxpayers named on the Liechtenstein list, and used the intelligence gained to confirm or update its detection and audit procedures for offshore banking.

The Government of Canada is pleased that the Auditor General confirmed that the Liechtenstein list was managed as intended, using the information and tools available at the time and accepts all recommendations and has taken steps to address the issues identified.

Economic Action Plan (EAP) 2013 announced the introduction of new tools and legislative measures that will strengthen CRA’s ability to combat international tax evasion and aggressive tax avoidance. The Government of Canada is investing $30 million over five years for the CRA to implement EAP 2013 measures. This includes new resources of $15 million through EAP 2013 to implement the Electronic Funds Transfer reporting and an additional $15 million in refocused CRA funds that will be dedicated to offshore compliance activities. To emphasize its commitment to addressing offshore non-compliance, the CRA established the Offshore Compliance Division to implement EAP 2013 measures specific to offshore non-compliance and to deliver related program activities. As a result of the creation of the Division, three dedicated Offshore Compliance Specialized Teams were created in April 2014 in three regions across Canada.

I am pleased to report recent Government actions that align with the Standing Committee’s three recommendations.

Recommendation 1

That, by March 2016, the Canada Revenue Agency provide the Standing Committee on Public Accounts with a progress report outlining the results of its re-examination of timelines to establish benchmarks for the conduct of offshore audits.

Response

With respect to Recommendation 1, the CRA has established benchmarks and made its offshore audit timelines clear to both staff and taxpayers effective April 2014. It will continue to re-examine timelines with a view to refining these benchmarks during 2015-2016. A progress report outlining the results of CRA’s re-examination will be provided to the Standing Committee by March 2016.

The following paragraphs constitute the progress reports requested by the Committee for September 2014 in Recommendations 2 and 3.

Recommendation 2

That, by September 2014, the Canada Revenue Agency provide the Standing Committee on Public Accounts with a progress report outlining the status of actions taken by its Offshore Compliance Division to ensure that the Agency’s use of audit agreements with taxpayers reflects its project and program objectives.

Response

With respect to Recommendation 2, since April 2014 the CRA has reviewed and approved all audit agreements, audit proposals and penalty application for all cases within its workload to ensure they align with program priorities and objectives. The CRA has also communicated the policy on audit agreements to its offshore auditors as part of their training.

Recommendation 3

That, by September 2014, the Canada Revenue Agency provide the Standing Committee on Public Accounts with a progress report outlining the status of efforts to ensure that its objectives and audit procedures for offshore accounts reflect lessons learned, that its online information reference space tool — or wiki-type page — is developed sufficiently to assist the Agency’s auditors in the performance of their responsibilities, and that the formal offshore audit policies, procedures and guidelines are communicated to staff.

Response

With respect to Recommendation 3, policies, procedures and guidelines have been developed and formalized and these are communicated to offshore auditors through training sessions, a newly developed Offshore Compliance Audit Manual, an internal online information reference space (WIKI) and through various job aids. These tools are an effective mechanism to ensure that both the objectives and audit procedures reflect lessons learned from previous offshore audits.

I would like to take this opportunity to thank you and the members of the Standing Committee again for your work.

Sincerely,

Kerry-Lynne D. Findlay, P.C., Q.C., M.P.