Thanks for having us.
My name is Debi Daviau, and I'm the president of the Professional Institute of the Public Service of Canada, or PIPSC. It's the national union that represents some 12,000 auditors and other tax professionals at the CRA across the country. Our members are skilled professionals and knowledgeable tax experts who ensure that powerful corporations and wealthy individuals remain just as accountable as the rest of us.
With me today is Mr. Ryan Campbell, our union economist and my technical adviser today.
We'd like to thank you for the opportunity to present our views on this critical issue. Together we'd be happy to answer any and all questions you may have after our presentation.
We've researched this issue from the point of view of tax professionals at the Canada Revenue Agency and produced three reports on tax avoidance and evasion. You can find them on our website at PIPSC.ca. I'd be happy to forward copies to the committee members as a follow-up to this meeting.
Few Canadians enjoy paying taxes, but they understand that it's important to do it. Taxes fund the public services that make us healthier and safer, protect the environment and nurture a stable economy in which businesses can thrive and compete.
A healthy tax system is defined by fairness and integrity. The rules must apply to everyone. Unfortunately, many wealthy individuals and corporations use their superior resources to look for a shelter or haven where the tax rules don't apply. While these privileged few get a reduced tax bill, governments lose revenue for public services, resulting in either service cuts or tax hikes for everybody else.
In February 2018, we conducted a survey of professional staff at the CRA, including auditors, managers, forensic accountants, economists, statisticians and actuaries. Their responses were eye-opening.
Much of the criticism levelled at Canada's tax system is that while it is designed to be fair, it's easier for some to get around the rules than it is for others. In our survey, nine out of 10 tax professionals at the Canada Revenue Agency agreed that it's easier for corporations and wealthy individuals to evade and/or avoid tax responsibilities than it is for average Canadians. Environics Research put that same question to the general public and found that eight out of 10 respondents felt the same way.
You should find it troubling that CRA professionals with special knowledge of the inner workings of the tax system were more likely to agree than an average Canadian. Over eight out of 10 also agreed that tax credits, tax exemptions and tax loopholes disproportionately benefit corporations and wealthy Canadians compared to average Canadians.
When asked if multinational corporations shift profits to low-tax regions, even when there is little or no corresponding economic activity taking place in that jurisdiction, three out of four respondents agreed. When asked if the CRA has adequate audit coverage capacity to ensure tax laws are being applied fairly across the country, only 16% of respondents agreed. When asked if training and technology advancements within CRA have not kept pace with the complexity of tax avoidance schemes, 79% of the respondents agreed.
All of these survey results confirm one basic fact: Canadians deserve a rigorous examination of the tax system.
Our CRA professionals are among the best in the world at what they do, but they face great challenges. Their job is to go after individuals and entities that in effect have unlimited resources and can aggressively exploit legal and international grey areas for their own gain. The CRA employees, by comparison, often feel outdone by those trying hardest to avoid taxes.
In 2012, sweeping budget cuts were introduced to the agency. Even with the more recent government reinvestments, it still doesn't have all the tools and staff it needs to get this job done
Does this make any sense when the Parliamentary Budget Officer's own numbers show a $5 return for every dollar invested in combatting international tax evasion and aggressive tax avoidance? Does this make sense at a time when government spending has skyrocketed to deal with the social and economic impact of the pandemic?
We need to fix this now. More than ever, Canadians need the tens of billions of dollars in tax revenue, if not more, that are sitting in offshore tax havens.
We believe that a number of steps can be taken to correct the situation.
First, we need better enforcement of existing tax laws. One of the simplest ways to make the system fairer is to ensure that the same rules apply to everyone.
Second, we need to prevent political interference at the CRA. This was particularly visible during the previous decade when the CRA was accused of shifting its focus away from big tax cheats to individuals, charities and small businesses.
Third, because CRA officials are frequently put in precarious situations in which they are asked to hold powerful players to account in a high-stakes setting, whistle-blower protection is crucial to ensuring that professional integrity is paramount during the tax assessment process.
Fourth, while government investments in the CRA have increased in recent federal budgets, Canada's population continues to grow, and so do the amount of commerce and the complexity of tax evasion schemes. The CRA needs to hire more technical advisers and to invest in technology and training to deal with these factors.
Fifth, the CRA must enhance the capacity of its regional offices. The Auditor General has found that taxpayers receive different treatment from the CRA depending on where they live and who they are. Its regional offices need the appropriate resources to ensure that laws are applied fairly from coast to coast.
Finally, a number of policy reforms need to be undertaken. Budget 2021 announced initiatives that when implemented will take tangible steps in the direction of tax fairness. These include a digital service tax for companies like Netflix and Amazon and the creation of a publicly accessible beneficial ownership registry. These are both important initiatives long championed by PIPSC members and our allies in civil society.
While these changes are welcomed, we still have work to do. The Parliamentary Budget Officer has estimated that as much as $25 billion of corporate tax revenue is lost to tax havens every year. We must do more to end the transfer pricing and profit shifting that facilitate this destructive practice.
As of now, some incremental steps are being taken, but there are a variety of additional actions that could be put in place. The end result would be a new, simplified view of the global commercial landscape, one in which corporations can be prevented from pitting countries against each other and are taxed fairly everywhere.
In conclusion, CRA professionals must receive the training, tools and resources they need to do their jobs. The CRA must receive appropriate funding to ensure that tax laws are enforced equitably and that wealthy individuals and powerful corporations are just as accountable as any other Canadian.
Additionally, there needs to be international co-operation and updates to legislation so that those who try the hardest to avoid taxes end up paying their fair share anyway.
Thank you for your time. Mr. Campbell and I would be pleased to answer your questions.