FINA Committee Report

Supplementary Opinion of the Conservative Party of Canada

Introduction

The Canada Revenue Agency (CRA) defines the term “tax avoidance” as any taxpayer activity that minimizes tax payable by contravening the object and spirit – but not the letter – of the law.  This is different than “tax evasion” which CRA defines as the deliberate underreporting of tax payable by concealing income or assets, and by making false statements.  The Conservative Party of Canada stands with ordinary Canadians, who work hard, pay their taxes and play by the rules.

On April 11, 2016, the Honourable Diane Lebouthillier, Minister of National Revenue, announced that the Government of Canada will invest $444.4 million over five years to enhance the ability of the Canada Revenue Agency (CRA) to detect, audit, and prosecute tax evasion – both at home and abroad.  The $444 million Liberal plan hopes to raise $2.7 billion over 5 years, “by hiring additional auditors and specialists; developing robust business intelligence infrastructure; increasing verification activities; and improving the quality of investigative work that targets criminal evaders.”[1] 

CRA will begin targeting different jurisdictions that are known to be tax havens,  hire 100 new auditors and add lawyers to investigation teams to work directly with auditors.  Additionally, CRA will create an Offshore Compliance Advisory Committee consisting of seven experts with significant legal, judicial and tax administrative experience.  Finally, the government has signalled its intention to adopt the Consumer Reporting Standard which will require Canadian financial institutions as of July 1, 2017 to have procedures in place to identify accounts held by non-residents.

We are cautiously optimistic that the Government can build on our strong record.  However, we are concerned that these expenditures will not provide the expected return on investment estimated in Budget 2016.  We are also concerned that if these measures do not bear sufficient fruit, and without “duty of care” provisions in place, that a more robust CRA will begin to target ordinary Canadians and small businesses rather than any large corporations and high net-worth individuals practicing tax evasion.

The Conservative Party of Canada would like to thank all of the witnesses appearing before the committee for sharing their expertise.

The Conservative Record

More can be done, but there has been much success in recent years.  Since 2006, the previous government, led by the Right Honourable Stephen Harper, introduced more than 85 measures intended to close tax loopholes and improve the fairness and integrity of the tax system.[2]  For example:

• Budget 2013 introduced transformational changes to CRA’s compliance programs that have improved the effectiveness and increased the integrity of the tax system by targeting high-risk tax evaders/avoiders. These changes were originally expected to result in additional revenues of $550 million per year by 2014/2015 but have achieved 1.5 billion [Table 1];
• Budget 2013 also invested $30 million over five years for the CRA to roll out new measures to combat international tax evasion and aggressive tax avoidance.
• The Voluntary Disclosure Program, a program that gives taxpayers the opportunity to voluntarily report unpaid taxes and avoid receiving a penalty has seen, since its inception, the number of taxpayers using this system increase dramatically.[3]
• The Offshore Tax Informant Program.  Launched in January 2014, this program allows people who provide the CRA with information about tax-evasion to receive a 5-15% cut of any additional revenue the CRA collects as a result of the tip.
• A strengthened Foreign Income Verification Form.  This measure introduced new reporting requirements for Canadian taxpayers with foreign property holdings to report more detailed information.
• Tax treaties and new tax information exchange agreements (TIEAs).  Canada signed its first TIEA in 2009 and as of March 31, 2014, Canada was party to 92 tax treaties and 19 tax information exchange agreements.
• The Unnamed Persons Act.  This measure streamlined the process for the CRA to obtain information concerning unnamed persons from third parties such as banks.
• Actions to close tax loopholes and improve fairness and integrity of the tax system were expected to provide $316 million of savings in 2013-2014, and rising to total $4.4 billion over five years.

Table 1:  Estimated and Actual Savings (millions of dollars)

Conclusion

We are cautiously optimistic that the Government can build on our strong record.  However, we are concerned that these expenditures will not provide the expected return on investment estimated in Budget 2016.  Given that the tax gap is not known, the better than expected outcomes of measures introduced by our Party while in power may have already attained much of the potential revenue.

If these measures do not bear sufficient fruit, and without “duty of care” provisions in place, a more robust CRA may begin to target ordinary Canadians and small businesses rather than any large corporations and high net-worth individuals practicing tax evasion.