Thank you for the invitation to appear before this committee.
In the short time available, I would like to discuss problems I've identified at the Canada Revenue Agency regarding overseas tax evasion.
As the Parliamentary Budget Officer stated, there are hundreds of millions of dollars in taxes, if not billions, that go undeclared and unreported and that escape Canadian tax authorities.
At the conclusion of my remarks, I will propose some suggestions for the committee to consider to correct these problems .
My attention was first drawn to the problem of overseas tax evasion in 2008 when one bank disclosure in Liechtenstein showed that 106 Canadians had over $100 million just in that one bank.
A couple of years later, another disclosure from a bank in Switzerland showed that bank had 1,785 accounts held by Canadians. The minimum amount to open a bank account in that bank was $500,000.
Then we had the leaks of the Panama papers and the Paradise papers, showing thousands of accounts involving thousands of Canadians. Among many glaring examples of inaction by Canada’s revenue agency are the Panama papers, disclosed over five years ago and listing 900 Canadians with accounts in that one law firm in Panama.
Since then, other countries around the world with citizens identified in the Panama papers have collected over $1.36 billion in taxes that were owing to them. Australia has recovered over $172 million, Ecuador $105 million, and Spain $209 million. Even Iceland, a country of 370,000 people, has recovered $32 million. In the case of Canada, five years later, no one has been charged and no one has been convicted for tax evasion as a result of the Panama papers, and there have been no charges or convictions related to Liechtenstein or Switzerland.
Meanwhile, the Canadian government doesn’t even know the size of the overseas tax evasion problem. The Parliamentary Budget Officer has been trying to estimate the tax gap since 2012, but the CRA won’t co-operate.
For a comparison of what action a country can undertake, look at what Australia has done about overseas tax evasion. They established Project Wickenby in 2006, when eight government agencies came together to, in their words, “protect the integrity of Australia’s financial and regulatory systems” by cracking down on use of illegal tax havens. In that time period, the Australians collected over $750 million. A number of people were charged and a number were convicted. They concluded Project Wickenby by establishing the Serious Financial Crime Taskforce.
In Canada, in the case of Liechtenstein, the CRA, in their words, “waived referrals for potential criminal investigation to gather information”. In other words, the agency promised not to charge the people involved in that tax scheme in exchange for them explaining to the CRA how it actually worked. However, any lessons learned from the Liechtenstein affair in 2008 have obviously not been very effective, since no one has ever been charged or convicted, for all the additional leaks over the last 12 years.
Because the CRA has been so incompetent on overseas tax evasion, a number of things have happened: One, we don’t have the money to fund our priorities; two, the rest of us have to make up the shortfall by paying more taxes; and, three, Canadians are wondering why we have a two-tiered justice system for tax evasion. Try to cheat on your domestic taxes and the CRA will likely find you, charge you, convict you and force your repayment. Check their website and you'll see their results. Hide your money overseas and you likely will never be charged or convicted. Again, check their website and you'll see the results.
Canadians might want to ask why people are being treated differently depending upon whether they’re evading their taxes at home or overseas.
Colleagues, I would suggest the following measures for the committee to consider.
One, measure the tax gap.
Two, change the law so that it becomes an automatic criminal offence to have an undeclared account overseas and those who don’t declare their overseas accounts will automatically serve jail time.
Three, introduce beneficial ownership legislation so we know who actually benefits from financial transactions.
Finally, change the salary structure at the Canada Revenue Agency to retain experienced and specialized employees. Too many of them are being recruited by the other side for substantial salary increases.
Thank you, Chair.