Finance Committee on Dec. 13th, 2010

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Paillé, s'il vous plaît.

[Daniel Paillé, Bloc, Hochelaga, QC]

If you will, I would like to follow up on that. There were some rather startling statements in the opening remarks of the Canada Revenue Agency.

I will begin on page 5. It states that "since 2006, the CRA has audited more than 6,700 cases, identifying approximately $3.5 billion in unpaid tax..."

If my arithmetic is right, if you divide $3.5 billion by 6,700 cases, that gives you an average of approximately $525,000 per case.

Then Mr. Montroy said that your Voluntary Disclosures Program was quite effective, that it was a huge success. The 3,000 disclosures helped you recover $138 million. That amounts to $46,000 per case, or 11.5 times less than the previous amount.

Taxpayers are not asked to file voluntary tax returns; they are required to do so. And yet here, you pat yourselves on the back, boasting that you recovered an incredible $46,000 on average per voluntary disclosure. However, in the same text, you state that when cases are prosecuted and analyzed, when you go full out, you can recover $525,000, or 11.5 times more.

Jean Drapeau already tried to impose a voluntary tax to pay for the Olympic Games, or Expo 67, I forget which it was.

When dealing with tax matters, I do not think we should be using voluntary measures; we should be prosecuting people more.

I would like to hear your comments on that.

[Lyse Ricard]

We cannot calculate averages the same way when dealing with the Voluntary Disclosures Program. Some disclosures were not linked to unpaid tax, but rather to amounts or assets held abroad, which also must be declared.

[Daniel Paillé, Bloc, Hochelaga, QC]

You talk about $138 million in tax revenue. For a tax expert, a tax revenue is a tax or a duty.

[Lyse Ricard]

Yes.

That said, of the 3,298 disclosures received in 2009-2010, some of those are not disclosures for which Canadians would have had to pay tax. We also have a mandatory return for offshore assets when a voluntary disclosure is not made. However, I do not have the numbers with me.

[Daniel Paillé, Bloc, Hochelaga, QC]

I am still quite astounded that people can file tax returns, but there is no tax. That must be quite rare, compared to the number of people who report income and do not have to pay tax.

[Lyse Ricard]

That is because the amount is not income, but rather an asset.

[Daniel Paillé, Bloc, Hochelaga, QC]

Coming back to your opening remarks—I apologize, but some things you said struck me—on page 2, you said that people could be reassessed for taxes and have to pay interest and penalties, and "taxpayers who are convicted could spend time in jail."

People often say that the rich do not pay any taxes, that they try to avoid doing so as much as possible. They might have to pay fines, but they have the means to do so. That is like someone who says that he can drive 200 km/h on the highway because he can afford to pay the ticket. And in this case, taxpayers could spend time in jail.

How does this all work? When does the Canada Revenue Agency decide to prosecute? Have people been brought to court? That is what we really want to know. Is someone going after those people?

[Richard Montroy]

Thank you, Mr. Chair.

That is a very good question because it implies a number of—

[Daniel Paillé, Bloc, Hochelaga, QC]

It is the answer that I am interested in.

[Richard Montroy]

That is an issue that pits civil law against criminal law, in that tax assessments are based on the balance of evidence. If the government wishes to engage criminal proceedings, it must prove the case beyond any reasonable doubt.

[Daniel Paillé, Bloc, Hochelaga, QC]

I know that. Mr. Mulcair will probably insist on that, but this is what I want to know: How does the relationship work between the Department of Finance, which decides to tap into the tax base, and the Revenue Agency, whose mandate is to recover the money? If it does not find any, does it then engage in proceedings? That is what I want to know. When is the Department of Justice or the Attorney General asked to engage proceedings?

[Richard Montroy]

Thank you.

Mr. Chair, when we receive a file, we assess the evidence and try to obtain the best possible proof. At one point, we consult with our colleagues at the Department of Justice to ensure that we have the evidence needed to support our case and engage criminal proceedings. It is only after we have had discussions with the Department of Justice and the director of public prosecutions that we decide whether or not we have enough evidence to launch criminal proceedings.

[Daniel Paillé, Bloc, Hochelaga, QC]

I have a question about that. In 2009, France announced that some banks would have to shut their tax havens, or rather their branches situated in tax havens. That same year, the five major Canadian banks had 79 branches in tax havens, according to their own annual reports.

Just recently, because of the French decision—

[The Chair, Conservative, James Rajotte]

Please ask your question.

[Daniel Paillé, Bloc, Hochelaga, QC]

—BNP Paribas announced that it was selling its operations in Panama, the Grand Cayman Islands and Bahamas to Scotiabank of Canada. When will Canada do the same, i.e., shut down bank subsidiaries in known tax havens, rather than simply buying into those places?

[The Chair, Conservative, James Rajotte]

Merci.

Just give a brief response, please.

[Brian Ernewein]

I simply want to say that is not our proposal.

We are seeking, through the mechanism I've already described, to deal with the issue of tax evasion through more transparency, specifically through exchange of information agreements that allow Canada to collect information that allows CRA to conduct its audit and enforce its taxes. It's not proposed to impose sanctions such as those imposed by France, or at least that has not been part of the objective to date. The objective has been to try to put transparency in place, so that isn't an issue.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

Monsieur Généreux, s'il vous plaît, vous disposez de sept minutes.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

First off, welcome to the committee. I too am interested in the comments you made, Ms. Ricard, in your opening remarks. I would like to come back to page 2, where you make the distinction between tax avoidance and tax evasion. In the interest of the people who are watching—because these meetings are being broadcast—I would like to make sure I understand the distinction, especially with regard to the law.

In your text, you state "the letter of the law." What do you mean by "the letter of the law," in the case of tax avoidance and evasion?

[Richard Montroy]

There is a difference between tax evasion and tax avoidance. Tax avoidance occurs when the provisions of the law are used, but perhaps in an unintended way. That is why, in 1988, the Department of Finance gave us the authority, through the anti-avoidance rule, to investigate transactions that are not necessarily in keeping with the object and spirit of the law.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

That means that you assess people's good faith in order to distinguish between the two.

[Richard Montroy]

Yes, good faith as well as documentary evidence and transactions.

With tax evasion, there is a clear and unequivocal intent to commit fraud, i.e., actions are taken to ensure that expected results are achieved.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Therefore, you make that distinction following an audit of each case. You said that you have audited more than 6,700 cases since 2006.

I am pleased to see that our government has put in place additional means, and I suppose that has helped you increase the number of cases. Has the number of cases you have audited increased significantly in recent years, given the additional amounts and resources we have invested?

[Lyse Ricard]

For example, in 2005-2006, there were 278 cases; in 2009-2010, there were 1,251.