Finally, the federal government is providing the Canada Revenue Agency (CRA) the resources it needs to take on those who hide their money in overseas tax havens. The last two federal budgets combined have given the CRA almost $1 billion in new money, and that progress is as welcome as it is overdue, given that the amount of money lost to overseas tax evasion is staggering.
The centerpiece of the 2016 budget commitment to the CRA was the investment of some $444 million in new money to “enhance its efforts to crack down on tax evasion and combat tax avoidance.” That amount was more than matched in the 2017 budget with an additional $524 million. The government said in 2016 that it expected to recoup $2.6 billion from its $444 million investment, a low target given estimates from organizations like the Conference Board of Canada that up to $47 billion in uncollected tax revenue is owing to the Government of Canada.
Similar benchmarks from last year, such as “a twelve-fold increase in the number of tax schemes examined by the CRA,” the hiring of 100 additional auditors, and a commitment to institute better co-operation between investigators and legal counsel “so that cases may be quickly brought to court” are all things that can be measured, so that Canadians will know just how much progress is being made.
The CRA had suffered from a shortage of resources, staff and information, but this increased funding will lead to more auditors and other investigative resources. This means the Agency will be able to examine more thoroughly existing sources of information, like the Panama Papers, as well as actively seek evidence of overseas tax evasion. This represents a tremendous increase in capabilities which, if pursued zealously, cannot fail to pay future dividends for all Canadians since the additional billions collected will fund government programs, pay down the deficit and reduce taxes.
I would suggest to the CRA that they reach out to the Parliamentary Budget Officer (PBO) and make him a welcome and active participant in this process, particularly as it relates to their promise to start estimating the tax gap (the difference between what is owed in taxes and what is actually collected). The PBO’s office has spent many years working on how to calculate such an estimate, and their expertise would be an invaluable contribution to the study.
My work on the tax gap goes back to 2012, when I asked the then PBO to investigate the economic impact of overseas tax evasion. That investigation evolved into an effort to determine the tax gap. After diligent effort, the PBO determined that it is indeed possible to provide an estimate of the tax gap – particularly as many jurisdictions around the world already perform such calculations – and subsequently approached the CRA to secure its co-operation in this endeavour. Unfortunately, years of stonewalling by the Agency prevented any progress. In the interim, however, groups as diverse as Canadians for Tax Fairness and the Conference Board of Canada have advocated such a study.
The only question remaining, now that CRA has the additional billion dollars in resources, is their competence and ability to perform the important work ahead. In the past, their lack of transparency and openness has raised serious concerns that two sets of rules exist. If you hide your money overseas, your chances of getting caught are very low, but if you cheat on your taxes domestically, you are very likely to get caught. Check the CRA website, where at any given time you will find all kinds of Canadians charged, convicted, and in some cases, imprisoned for domestic tax evasion. There are far fewer, if any, notices of anyone charged or convicted of overseas tax evasion.
The CRA needs to be more open with Canadians, tell us what they are actually doing, and stop using weasel words like the amount of taxes they have “identified” as opposed to actually collected. A new honesty and transparency policy, along with the promised financial commitment, would offer renewed confidence that all Canadians are treated equally, and we will finally see how much uncollected tax revenue a fair and efficient system can recover.
Percy Downe is a Senator from Charlottetown.