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$47 billion in unpaid taxes: Senator Downe

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The Conference Board of Canada’s new report titled Canadian Tax Avoidance: Examining the Potential Tax Gap, has concluded that up to $47 billion worth of taxes is not being collected by the Government of Canada.                                                         

Think of what could be accomplished if that money was actually collected by the federal government; the programs it could fund, the benefits it could offer to citizens, the improvements to health care that would be possible. The federal deficit could be eliminated.

Moreover, collecting this $47 billion would demonstrate to all Canadians the federal government is working hard to ensure that everyone pays their fair share — no more and no less.

The Conference Board has done sterling work in its efforts to measure the tax gap, but that does not absolve the Canada Revenue Agency (CRA) from its own longstanding obligations in this matter. In October of 2012, I wrote then Parliamentary Budget Officer (PBO) Kevin Page, asking him to investigate the economic impact of overseas tax evasion. That investigation evolved into an effort to determine the tax gap. After diligent effort, his office determined that it is indeed possible to estimate the tax gap (as done by a number of other countries, such as the United States and the United Kingdom), and approached the CRA to secure the Agency’s cooperation in its study.

Unfortunately, neither he nor his successors saw much “cooperation” from the CRA, as it put obstacle after obstacle before the PBO, unwilling to let this inquiry proceed. An initial refusal by the CRA to estimate the tax gap subsequently became a refusal to provide data that would enable the PBO to provide its own estimate. At one point, the CRA held out the possibility of providing the data requested by the PBO — information the Agency is required by law to share — but only at considerable expense to the Budget Office. It also imposed such conditions as to make the information almost unusable. And even then, the information still has not been released.

In April of last year, there was a glimmer of hope when the Minister of National Revenue announced a series of measures to combat overseas tax evasion, including “beginning work to estimate the tax gap so that Canadians and Parliamentarians have confidence in the fairness of the tax system.”

Unfortunately, the subsequent report of the CRA’s Offshore Compliance Advisory Committee dealt mainly with the idea of estimating the tax gap, and the specific aspect of the gap that was examined dealt with the Goods and Services Tax/Harmonized Sales Tax, the low-hanging fruit of tax gap analysis, and a far cry from overseas tax evasion. And the CRA still refuses to provide the PBO with the information he has requested.

In the 2015 federal election, the Liberal Party platform contained a commitment to “directing the CRA to immediately begin an analysis and stronger enforcement of tax evasion, or what the OECD calls the tax gap.”

Calculation of the tax gap would not only focus the attention of Canadians on the nature and scale of the problem of overseas tax evasion, but would also, as the Conference Board report notes, “have important implications for policy-makers since it could act as a potential guide for public resources and policy priorities devoted to increasing tax compliance.” Even so, the CRA still refuses to commit to such an analysis despite the change in government.

In his mandate letter to the Minister of National Revenue, Prime Minister Justin Trudeau stated explicitly:

We have also committed to set a higher bar for openness and transparency in government.  It is time to shine more light on government to ensure it remains focused on the people it serves.  Government and its information should be open by default.  If we want Canadians to trust their government, we need a government that trusts Canadians.

Now is the time for the Prime Minister to order the Canada Revenue Agency to get with the program and provide the Parliamentary Budget Officer with the required information, so Canadians will know the actual amount of taxes owed, but not collected, and what resources the  CRA needs to collect those taxes.

Only then will the CRA meet the standard of openness and transparency set by the Prime Minister.

Percy E. Downe is a senator representing Prince Edward Island. He is deputy chair of the Senate Committee on Foreign Affairs and International Trade and is a member of the Senate Committee on Internal Economy, Budget and Estimates.

This article appeared in the March 7, 2017 edition of the Guardian.

The Conference Board of Canada’s new report titled Canadian Tax Avoidance: Examining the Potential Tax Gap, has concluded that up to $47 billion worth of taxes is not being collected by the Government of Canada.                                                         

Think of what could be accomplished if that money was actually collected by the federal government; the programs it could fund, the benefits it could offer to citizens, the improvements to health care that would be possible. The federal deficit could be eliminated.

Moreover, collecting this $47 billion would demonstrate to all Canadians the federal government is working hard to ensure that everyone pays their fair share — no more and no less.

The Conference Board has done sterling work in its efforts to measure the tax gap, but that does not absolve the Canada Revenue Agency (CRA) from its own longstanding obligations in this matter. In October of 2012, I wrote then Parliamentary Budget Officer (PBO) Kevin Page, asking him to investigate the economic impact of overseas tax evasion. That investigation evolved into an effort to determine the tax gap. After diligent effort, his office determined that it is indeed possible to estimate the tax gap (as done by a number of other countries, such as the United States and the United Kingdom), and approached the CRA to secure the Agency’s cooperation in its study.

Unfortunately, neither he nor his successors saw much “cooperation” from the CRA, as it put obstacle after obstacle before the PBO, unwilling to let this inquiry proceed. An initial refusal by the CRA to estimate the tax gap subsequently became a refusal to provide data that would enable the PBO to provide its own estimate. At one point, the CRA held out the possibility of providing the data requested by the PBO — information the Agency is required by law to share — but only at considerable expense to the Budget Office. It also imposed such conditions as to make the information almost unusable. And even then, the information still has not been released.

In April of last year, there was a glimmer of hope when the Minister of National Revenue announced a series of measures to combat overseas tax evasion, including “beginning work to estimate the tax gap so that Canadians and Parliamentarians have confidence in the fairness of the tax system.”

Unfortunately, the subsequent report of the CRA’s Offshore Compliance Advisory Committee dealt mainly with the idea of estimating the tax gap, and the specific aspect of the gap that was examined dealt with the Goods and Services Tax/Harmonized Sales Tax, the low-hanging fruit of tax gap analysis, and a far cry from overseas tax evasion. And the CRA still refuses to provide the PBO with the information he has requested.

In the 2015 federal election, the Liberal Party platform contained a commitment to “directing the CRA to immediately begin an analysis and stronger enforcement of tax evasion, or what the OECD calls the tax gap.”

Calculation of the tax gap would not only focus the attention of Canadians on the nature and scale of the problem of overseas tax evasion, but would also, as the Conference Board report notes, “have important implications for policy-makers since it could act as a potential guide for public resources and policy priorities devoted to increasing tax compliance.” Even so, the CRA still refuses to commit to such an analysis despite the change in government.

In his mandate letter to the Minister of National Revenue, Prime Minister Justin Trudeau stated explicitly:

We have also committed to set a higher bar for openness and transparency in government.  It is time to shine more light on government to ensure it remains focused on the people it serves.  Government and its information should be open by default.  If we want Canadians to trust their government, we need a government that trusts Canadians.

Now is the time for the Prime Minister to order the Canada Revenue Agency to get with the program and provide the Parliamentary Budget Officer with the required information, so Canadians will know the actual amount of taxes owed, but not collected, and what resources the  CRA needs to collect those taxes.

Only then will the CRA meet the standard of openness and transparency set by the Prime Minister.

Percy E. Downe is a senator representing Prince Edward Island. He is deputy chair of the Senate Committee on Foreign Affairs and International Trade and is a member of the Senate Committee on Internal Economy, Budget and Estimates.

This article appeared in the March 7, 2017 edition of the Guardian.

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