Finance Committee on May 12th, 2015

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Thank you, Mr. Chair.

I would like to continue discussing HSBC Bank.

We really feel that the Canada Revenue Agency went easy in that case, especially if we compare its attitude to that of other countries. For example, Argentina, France and Belgium laid charges in related cases.

The agency received 1,349 files. Some of those taxpayers did not have enough money and others were deemed to be high risk. So investigations were carried out on 264 cases that were voluntarily disclosed. My figures should be fairly close. The non-compliant taxpayers will pay fines in 21 cases. Where are the charges against those individuals?

Between 2006 and 2013, there were eight convictions for offshore tax evasion. How many convictions have you obtained and how many charges have you laid since 2013?

[Ted Gallivan]

If we focus only on the HSBC Bank cases, I would like to point out that a number of files were examined to determine whether there were grounds for an investigation in order to lay criminal charges. We don't have sufficient evidence to carry out an investigation in any of those cases or to lay charges under Canadian legislation.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

What should we improve in this area? Argentina, France and Belgium are successfully laying charges. Have you looked into the role of HSBC Bank's Canadian branches? Did the bank staff participate in the transfers? What happens to people who encourage transfers of funds to tax heavens? Have you conducted investigations in order to potentially lay charges? It does appear that those people are acting with impunity.

For example, the National Consortium of Investigative Journalists carried out investigations. In the document margins, in the footnotes, the banker would write that he suggested his client open an offshore account in the Bahamas, or somewhere else. People who say things like that are encouraging international tax evasion. Is that not punishable?

[Ted Gallivan]

I can tell you that our criminal investigations program is focused on stakeholders and promoters. We are no longer spending our days going after small companies for small amounts of money.

Promoters and professionals who participate in that environment are the focal point of our criminal investigations. Our challenge is to gather the facts that give us ammunition to carry out criminal investigations. That is why I mentioned the disclosures that give us much more tangible evidence.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Are some of those facilitators now worried?

[Ted Gallivan]

I think that they are, as the number of disclosures has doubled. Last year, the number of international disclosures went from 5,000 to 10,000. When we launched our disclosure line, we started receiving information on offshore transactions of more than $10,000. Over the course of that 12-month period, the number of disclosures doubled.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

Do I have any time left, Mr. Chair?

[The Chair, Conservative, James Rajotte]

Only a little bit.

[Pierre Dionne Labelle, NDP, Rivière-du-Nord, QC]

So I will be very brief.

Mr. Huppé, during your presentation, you talked about requests for this year. Your requests have decreased by nearly $50 million. Your document says that what was proposed in the budget is not included in what you mentioned. So there is a shortfall there.

[Roch Huppé]

As always, we are following a process, but the budget was obviously announced after the deadline for producing main estimates documentation. In short, what was announced in the budget will follow the usual process—the money will be provided to the agency through supplementary estimates.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

We'll go to Mr. Adler please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, officials, for being here this morning. I want to talk a bit about the voluntary disclosure program. We all know why it exists, to encourage compliance with Canada's tax laws. Could you talk a bit first of all about the success of the VDP and about whether that success has grown within the last decade, for example?

[Ted Gallivan]

Various figures are used depending on how far back in time you go. It's 400% if you go back to 2008-09 depending on the year you pick, and you don't want to cherry-pick. I'll just talk about fiscal 2013-14 to the fiscal year that just ended, 2014-15. Overall we went from $15,800 to $19,000. The dollar value of income associated with that grew from $800 million to $1.3 billion. The component of that though that relates to offshore, as I was mentioning in another response, grew from $5,200 to $10,200, and the dollar value grew from $300 million to $780 million, so there's been a very significant increase.

At the same time, we were given new powers through budget 2013 and new sources of information. Internally within the agency we adopted our communication approach, and we deliberately focused communication messages encouraging taxpayers to file voluntary disclosures.

[Mark Adler, Conservative, York Centre, ON]

This is for those who do business both domestically and internationally of course. What are some of the measures you've taken to help Canadians become aware that they may not be declaring all that they should be, and aware of the options that are open to them?

[Ted Gallivan]

They run the gamut. When there's a criminal conviction, we now publish the criminal conviction and the information related to the crime, and then we encourage people who may have a similar situation or fact set to make a voluntary disclosure. In response to media inquires and news releases, we very deliberately lay out the fact that we have access to all international transactions over $10,000, the fact that there is a paid informant line, and the idea that, by the way, if someone does want to correct their affairs going forward, they do have voluntary disclosure as an option.

[Mark Adler, Conservative, York Centre, ON]

You pretty much run the gamut then from exhortation right up to prosecution in some instances.

[Ted Gallivan]

That's correct.

[Mark Adler, Conservative, York Centre, ON]

In terms of the voluntary disclosure program, could you give me a fictitious example of a company or individual who realizes they have problems they must correct or address, so they opt for the voluntary disclosure versus the situation of those who know they have issues, choose not to do anything, and are willing to wait it out to see if they actually get caught? Could you outline the two different scenarios for us? What would be the implications of both?

[Ted Gallivan]

Sure. I was speaking to a tax practitioner last week and they talked about a case of succession, so either on the death of the parents or planning for that eventuality, the business was transferred to the children.

That scenario gives rise to a lot of voluntary disclosures. If they follow the voluntary disclosure route and CRA hasn't initiated any audit or enforcement action, upon payment of all the tax and all the arrears interest owing, they wouldn't be subject to any penalty.

If they choose the different path, first of all, the practitioner could be liable for criminal prosecution or third party sanctions, which aren't criminal but monetary, and the individuals upon conviction could be liable for up to 200% of the tax owing. That's quite a different outcome in tax administration.

[Mark Adler, Conservative, York Centre, ON]

In terms of the practitioners, presumably you're working with the professions to educate them on the value of encouraging their clients to disclose voluntarily. Could you talk a bit about what you do with the professions to educate them on that front?

[Ted Gallivan]

We have a very close relationship from small to large, so with the CFIB, the Canadian Payroll Association and CPA Canada, the accounting community, with seven formal subcommittees, we have regular cross-communication. In other words, they push out communication messages to their members and they look to us for information.

We would provide them information regarding the VDP, as I mentioned, certainly around the timing. Again, back on January 1 we were starting to get new FINTRAC data. The time is right; we draft an article, and then they push it out to their members through their publications, through their websites, through their communication means.

[Mark Adler, Conservative, York Centre, ON]

Do you have a study, a dollar figure that you could share with the committee, the amount that has been paid as a result of voluntary disclosure over the past year, maybe two years, three years?

[Ted Gallivan]

The figure I'd share is the total income involved in the last fiscal year was $1.3 billion came in through voluntary disclosures.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

I'm fine, Mr. Chair. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

We will go to Ms. Bateman, please.