Fairness for All Canadian Taxpayers Act (measuring the tax gap to fight international tax evasion)

An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax)


Second reading (House), as of April 3, 2019

Subscribe to a feed (what's a feed?) of speeches and votes in the House related to Bill S-243.


This is from the published bill. The Library of Parliament often publishes better independent summaries.

This enactment amends the Canada Revenue Agency Act to require the Canada Revenue Agency to report on all convictions for tax evasion, including international tax evasion, and on the tax gap in the annual report it submits to the Minister of National Revenue for tabling in Parliament. It also requires the Minister to provide data on the tax gap to the Parliamentary Budget Officer.


All sorts of information on this bill is available at LEGISinfo, provided by the Library of Parliament. You can also read the full text of the bill.

Fairness for All Canadian Taxpayers ActPrivate Members' Business

April 3rd, 2019 / 7 p.m.
See context

Winnipeg North Manitoba


Kevin Lamoureux LiberalParliamentary Secretary to the Leader of the Government in the House of Commons

Mr. Speaker, it is always a pleasure to rise to speak to private members' business, especially when it comes to taxation.

Virtually from day one, this government has taken the taxation issue very seriously. I found the Conservative Party's approach to taxes interesting, and I would like to provide some thoughts on that.

I would like to first acknowledge Senator Percy Downe in the other place who brought this legislation forward. I had the opportunity many years ago to meet Senator Downe at a parliamentary conference. I have deep respect for him and I appreciate many of the fine things he has done over the years.

Let there be no doubt that Canadians are concerned about tax avoidance and tax evasion. Who could blame them? After all, we expect tax fairness, which is why the Prime Minister and our government have made it a high priority.

I would like members to think of what we have been able to accomplish in just over three years. Our very first bill dealt with taxation. The member for Waterloo often talks about Canada's middle class and the importance of the legislation that cut taxes for Canada's middle class.

We talked about a sense of fairness, and that is what the sponsor of the bill brought forward in his comments. At the same time we recognized that the wealthiest 1% of Canadians should pay a bit more. We argued that paying a bit more was their fair share. Our government has put that into place as standard policy, while we look at ways to change our tax laws to ensure a higher sense of tax fairness.

The government's first action was to increase the tax on Canada's wealthiest 1% and at the same time provide a tax decrease for Canada's middle class. This literally put hundreds of millions of dollars into the pocket of Canada's middle class. It affected millions of Canadians in every region of our country.

I will fast forward to budgets. We introduced a budget last week. It shows that our government is continuing its commitment to fight those individuals who are not prepared to pay their fair share.

A couple of years ago, the minister responsible for CRA introduced, through a budget measure, about $450 million. That is a guesstimate. Last budget year, we again brought in well over $400 million. If we combine those two budget allotments, we are getting close to $1 billion, which is a great deal of money. The purpose of that was to ensure that CRA would have additional resources to go after individuals who were trying to avoid paying taxes.

Our government recognizes the importance of tax fairness and has taken specific action to address the issue.

I am pleased to say that it does not stop there. We hear about international taxes and about addressing that issue. In the last three years our government has taken an aggressive approach toward tax treaties.

By having tax treaties, whether it is with Madagascar or other countries, we are better able to address the types of issues that we are talking about tonight.

To me, that signals a very strong message to individuals, whether here in Canada or outside Canada, that there is an expectation that people will pay their fair share of taxes. I would like to think that people following this debate would recognize or at least be aware that this government is committed to ensuring that they will do that.

When we were talking about Bill S-243 and I had the opportunity to ask a question of the member, I made reference to a number of issues and put them on the table. The Conservative Party has voted against many of them. That is somewhat interesting. Conservatives are bringing forward legislation to say that Canadians need to pay their fair share, but when it came time to actually vote on initiatives affecting Canadians today, they voted no. I think that speaks volumes.

A question was posed when we were talking about this specific piece of legislation. It was not I who posed the question, but one of my colleagues from the New Democratic Party, and the question was related to Stephen Harper's tenure as Prime Minister for 10 years. It asked why he did not bring in the type of legislation the Conservative member is bringing in through the Senate today. Ultimately, the member indicated that the fault was not necessarily in him, but in a previous administration.

It is important to take a look at the Conservative Party's record. Canadians will see that the Conservative Party has been consistent. It has been consistent in not dealing with the whole issue of tax fairness. I saw that when I sat in opposition. I saw many initiatives coming from the Stephen Harper regime, but I did not get any sense that they were looking at ways to ensure more tax equity in government policy, nor did I ever see a government back then that was prepared to go after those who try to avoid paying their fair share.

When I posed the question, the Conservatives stood up and said that we have not had many prosecutions. We have had more prosecutions under the Liberal government than under the Conservatives, and it has only been the last couple of years that the government has invested the resources that are necessary. I would suggest that by doing that, the Liberal government is getting more and more people to pay their fair share, which could actually be a good thing. If a prosecution can be avoided when there is an agreement for monies to be paid and there is a fairer sense of taxation, that is ultimately a good thing.

Having said all of that, I think there is some merit for the legislation. I look forward to hearing more debate on this very important issue. I believe it is very important.

One of the things the Prime Minister often talks about is that he wants members of Parliament to listen to what their constituents are saying in their ridings, back home in their communities, and to bring those ideas and thoughts back to the chamber and to the respective caucuses.

This is an important issue to Canadians and, therefore, it is an important issue for this government. Maybe I will get an opportunity at a later time to be able to speak to this very important issue of tax evasion.

Fairness for All Canadian Taxpayers ActPrivate Members' Business

April 3rd, 2019 / 6:50 p.m.
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Tom Kmiec Conservative Calgary Shepard, AB

Mr. Speaker, I am glad to be joining this debate in this late evening on a Wednesday. At the outset, I am going to share a few observations about the debate so far on this Senate proposal as well as some observations about things that were said in the House.

First of all, this is a tax matter. We all remember that it was Motion No. 43, a duty of care motion, that was also put forward by the seconder of the bill in the House, the member for Calgary Rocky Ridge. At the time I spoke to it, the Canada Revenue Agency's customer service and the way it treats Canadians who are filing taxes continued to be deplorable, in my opinion. I thank the member for Calgary Rocky Ridge for having sponsored another move toward getting fair treatment for Canadians. I think this is part of it. Understanding the tax gap between what is expected to be collected and what is actually being collected is a very important matter.

Second, it was Senator Percy Downe, from Prince Edward Island, who moved this proposal in the other place. Let it be said that when Conservatives find honest Liberals, we will work with them. We will support their ideas. In fact, it is a Conservative member of Parliament who has brought this Senate proposal to the floor of this House for, I expect and I hope, swift passage.

It is interesting that it is a Senate Liberal, also someone who was kicked out of the Liberal caucus, who is pushing for greater tax fairness and more tax knowledge for fellow Canadians. Perhaps it is something to do with people who speak the truth and are interested in the truth being kicked out of that caucus.

Bill S-243 is about reporting on unpaid income taxes. The bill is quite short, but it provides an opportunity to define the tax gap. I note that at least on one other occasion, members were wondering what we are asking the CRA to do. We are asking it to disclose more information about taxes that remain unpaid. Every single year there is a discrepancy between what the government expects to collect and is able to collect and taxes that remain outstanding. That discrepancy between the two accumulates over time. I know that many Canadians are interested in knowing more about why it is accumulating and who these people are who are not paying these taxes.

I especially like the definition of the tax gap being put forward in proposed subsection 88.1(1), which is an amendment to the Canada Revenue Agency Act, because it is a simple amendment. It is very clear what type of information will be provided to the Parliamentary Budget Officer.

I have been a big believer in legislating more rules for civil servants, the bureaucracy, on how they do their work and report their work, both to Parliament and to the public. We spend far too much time in this House legislating what Canadians can do on an everyday basis, whether it is their hobbies or air travel. In general, we create a lot of rules that businesses, corporations and everyday people have to live up to. There is an expectation that they need to know what the rules are. We spend too little time legislating what the civil service does and the type of work it does on behalf of Canadians.

There is a Yiddish proverb that says, “Prayers go up and blessings come down”. It has been a prayer and a hope of mine that we will see more such private members' bills and more government bills, in fact, that would look after legislating what the civil service does and how it does its work, both in the collection of information and in the disclosure of information.

We see in this particular proposal the following:

The Minister shall provide the Parliamentary Budget Officer with the data on the tax gap collected and compiled under subsection (2) and any additional data that the Parliamentary Budget Officer considers relevant to conducting a further analysis of the tax gap.

That has been an issue in the past for the PBO. Finance Canada and other departments have been unwilling to disclose information to the PBO. I am going to allow the work they do, because often I will send emails to them, sometimes late at night, asking specific questions about budget line items. We saw that when the member for Edmonton West added up different sections of the budget tables, they did not, in fact, add up.

It is thanks to the PBO that parliamentarians such as us are able to do that work. If we have a question and we want to double-check whether our math is correct or whether we understand a concept being advocated by or pushed forward by the government, we can check with the PBO whether it is true. If it is not true, they can then double-check with the departmental officials they have connections with.

When department officials refuse to disclose information being requested from the PBO, it is a great matter of concern to parliamentarians. We rely on the PBO in a lot of ways to provide us technical information and to ensure our calculations are in fact correct. Perhaps if Finance Canada had taken advantage of the PBO's expertise, it would not have had to table a new set of fiscal tables, updating a great deal of them in the past budget document.

However, this is about the tax gap. This would provide Canadians with an ability to understand what it is over time. It is of great interest. The member for Sherbrooke mentioned in his speech that three times there had been major scandals and there had been great interest from everyday Canadians and members of the public. Different transparency and anti-corruption organizations have mentioned that such information would be of value for the public to have.

There is already a lot of information that the government makes public. This particular one, though, is something I have not seen made available on an easy-to-understand basis. The way it is being laid out in the definition of the tax gap, proposed subsection 88.1(1), offers that opportunity for Canadians both to understand what is being calculated and how it is being calculated. From then on, it would be up to parliamentarians to decide what to do with that information. More information from the civil service is always a good thing. At the end of the day, we are all hoping for greater transparency from the CRA, both on what it expects to collect and what it is actually able to collect.

That brings me back to the finance committee, the committee of the House on which I sit. It is looking at Bill S-6, a Madagascar tax treaty. I asked a question of the officials there whether they had any ability in calculating and telling us which corporations in Canada would be affected by that tax treaty and whether an analysis had been done. It was not clear to me from the answers at the time whether it was done.

Prior to Bill S-6 being proposed, a tax gap would have existed, at least in my mind it would have existed, between potential tax planning by certain corporations and individuals who would do business in Madagascar and what would happen after the ratification of Bill S-6. I was told that this information may be collected at some point by the CRA or it may not. That, again, is the tax gap between what may happen if a tax treaty is introduced or not. Aggressive tax planning does happen. It is illegal to do so in jurisdictions that do business with Canada.

Canadians will benefit greatly from the tax gap. It is perfectly reasonable to ask the Canada Revenue Agency to make the calculation. Part of the benefit will be that if it gets into the practice of collecting information and providing it to both parliamentarians and members of the public, it will also force it to start actually collecting that information after the fact. That is of great interest and great benefit. It would allow Canadians and parliamentarians to make access to information requests, to better understand the methods it is using to calculate it and to see the email transmissions among different government officials on the tax gap. It would also help us understand the conviction rate, who is being chased, whether a systemic abuse of the system is going on and whether particular tax treaties with Canada are being abused, which we should perhaps look at again.

All of this publicly available information that we do not have right now should be available right now. I am a parliamentarian who makes a lot of access to information requests and has a lot of Order Paper questions. Therefore, the disclosure of information is important, the calculation in the first place. Too often in this place, the government comes back with a response saying that it does not collect information in that particular way and therefore it cannot answer the question. This Senate proposal, from a Liberal senator, Senator Percy Downe from Prince Edward Island, will do what I have been, like I said before in the Yiddish proverb, praying for, which is more rules on civil servants and bureaucrats, less rules on everyday Canadians and a greater disclosure of information to Canadians and parliamentarians. It is a blessing that is coming down to earth.

I ask all members to heartily support the bill. It is a great proposal and it would provide greater transparency of tax information.

Fairness for All Canadian Taxpayers ActPrivate Members' Business

April 3rd, 2019 / 6:40 p.m.
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Pierre-Luc Dusseault NDP Sherbrooke, QC

Mr. Speaker, I am pleased to join this debate.

First off, I want to thank the senator who tabled this bill in the other place for getting it to the House of Commons. I commend him for his hard work and his initiative. I really respect everything he has done over the past few years to fight tax evasion. Measuring the tax gap, the issue at the heart of this bill, is also one of his primary concerns.

As I mentioned earlier in my question, the bill would require data to be provided to the Parliamentary Budget Officer so that he can independently analyze and calculate the tax gap. The tax gap is a measure of the government's annual tax losses relative to the Canadian economy and the global economy. Tax gap estimation is quite complex. The tax gap provides a gauge of how much money the Government of Canada is losing because of its unfair tax system.

Canada's unfair tax system also makes it possible for some taxpayers, especially rich taxpayers, to avoid paying taxes in Canada. These people can afford to hire tax lawyers who charge $500 an hour and who know how to work the system so their clients do not have to contribute to public services and infrastructure in our society. Calculating the tax gap is extremely important, because it tells us whether our efforts are paying off. This government is not calculating the tax gap because it does not mind missing out on several billion dollars every year.

We in the NDP understand the immeasurable losses caused by national and international tax evasion and aggressive tax avoidance. Aggressive tax avoidance also seeks to circumvent our laws, which is another part of the problem. Each transaction in isolation is legal, but when put together, the transactions amount to immoral acts. Tax lawyers are not always the most ethical individuals.

The ultimate goal of calculating the tax gap is to check whether our efforts are paying off. If we were to calculate the tax gap for 2019, for example, and if the government had a plan to address tax evasion, we should be able to see whether any progress has been made in five or ten years.

The biggest problem for the Liberal government is that they do not have any results to show Canadians when it comes to fighting tax evasion. For three years the Minister of National Revenue has been saying over and over again that the Liberal government invested $1 billion in the Canada Revenue Agency to fight tax evasion and that it hired 1,300 auditors.

When people hear that they say that the government is committing a lot of financial and human resources to fighting tax evasion. They also say that such considerable efforts should lead to results, but that is not the case. The government has nothing to show Canadians.

Just this week the Minister of National Revenue announced that searches were conducted in Vancouver last week. That seemed to be the best thing she could announce to Canadians on the tax evasion file. There were three tax scandals in recent years, the Panama papers, the paradise papers, and the Bahamas leaks, but the minister was very proud to announce those searches. She seemed pleased to see that progress was being made on this file even though we are far from seeing charges and even farther from securing convictions.

The government's four-year mandate is coming to an end, and it is still at the search warrant stage, when we should be seeing results. The government may have invested $1 billion and hired 1,300 auditors, but it still has nothing to show Canadians.

To make matters worse, the Liberals will try to make people believe that they have obtained results, as the Minister of National Revenue has already done on several occasions. When we asked her what the results were, she talked on various occasions about 78 convictions. The number varied. Sometimes it was higher and sometimes lower.

When we pressed further and asked her about the convictions in question, we realized that they all had to do with domestic tax evasion. However, there is a rather big difference between domestic and international tax evasion.

When my NDP colleagues and I asked questions about international tax evasion, we were told that there had been convictions. Saying that amounts to misleading Canadians. In fact, the minister was forced to acknowledge that. Her officials had to acknowledge that in committee. When we asked them how many convictions there had been for international tax evasion, they had to admit that there had not been any. There have been no convictions for international tax evasion. That is the Liberal government's track record. That is the reality.

The Liberals may say that they are working on it and moving mountains to tighten the net, but the net is still wide open. The basic problem here is that the tax laws are still too lax, too flexible, too elastic. Taxpayers who can afford to hire tax lawyers are able to avoid paying their fair share and to get off scott-free when they are caught. When CRA investigators are faced with that situation, they can only say to themselves that the tax laws are so lax that they can do nothing about it. That is the crux of the problem. The government does not want to acknowledge it. That is the reason for the lack of results.

If they do not address the root of the problem, hiring 1,300 people and investing $1 billion will not make a difference, because the laws are too lax. They do not want to acknowledge that either. They do not want to deal with tax flexibility, which is the root of the problem.

This is why Bill S-243 is so important. If we can measure the tax gap and monitor any progress, we may finally have some way to see whether the government is making progress on combatting tax evasion. This would also give us a clear picture of international and domestic convictions for tax evasion in a report that would be presented by the agency. The two types could be separated in the agency's public reports. The real problem here is that the minister does not distinguish between the two. That may be because she does not know the difference. We would have to ask her.

The Liberal government is showing a serious lack of transparency, which is why the senator introduced this bill and shepherded it this far. He can see it, as can all of us on this side of the House. Even the Conservatives have woken up, even though they were the ones who fought the former parliamentary budget officer to avoid giving him information. They have woken up and joined us in demanding results and demanding meaningful action on tax evasion.

I will be happy to support this initiative. I hope that my colleagues will join me so that we can shed some light on the Canada Revenue Agency and finally see results over time. This will help us understand whether our efforts are working and change course if we find that our efforts are inadequate. So far, the government's efforts have not been working.

I hope that the government will support this initiative, which would be in line with its claims of wanting transparency and openness. It now has an opportunity to demonstrate transparency and openness at the Canada Revenue Agency.

Fairness for All Canadian Taxpayers ActPrivate Members' Business

April 3rd, 2019 / 6:35 p.m.
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Brenda Shanahan Liberal Châteauguay—Lacolle, QC

Mr. Speaker, I rise today to speak to the Senate public bill, Bill S-243.

Before I begin, I would like to thank Senator Downe for his work in both highlighting the importance of better understanding Canada's tax gap and the fight against tax evasion and aggressive tax avoidance. Rest assured, the government shares the senator's concerns and understands the importance of both issues.

Early in her mandate in April 2016, the Minister of National Revenue publicly committed to releasing a series of reports that would provide detailed information about Canada's tax gap for the first time ever. In fact, from an overall tax gap perspective, few countries produce and publish tax gaps for all of their major tax categories. The OECD has stated that, as of 2015, only eight countries measured and published the major components of their tax gaps. Canada was proud to join this group of eight starting in 2016. With this information, the government is able to report on the difference between the taxes that would be paid if all obligations were met and taxes that are actually paid and collected. It is important for Canadians to have an awareness of Canada's tax gap and an appreciation of how evading taxes cheats us all.

Canada is now one of the leaders in the tax gap estimation among OECD countries. For example, the CRA was the first tax administration to use underground economy statistics to estimate the personal income tax gap and the first to publish an estimate of the OECD concept of tax assured. As the minister indicated, this tax gap information serves as an important tool that helps build the confidence of Canadians about the fairness of the tax system.

Having an understanding of the tax gap helps CRA identify areas of higher risk for non-compliance. In turn, the CRA can allocate resources where the risks are highest. Generally speaking, tax gap information can provide tax administrations with insights into the overall health of the tax system and indicate the levels of non-compliance with tax laws.

The agency has adopted a progressive approach to estimating Canada's tax gap. Its approach involves taking the time to develop appropriate, well-founded research methods that work in the Canadian context. The method varies depending on the type of tax. Sometimes, a single tax may require the use of more than one assessment method, as I am sure members understand.

I am pleased to announce that the agency's work has resulted in the release of four reports on tax gaps in Canada. A fifth report on the incorporated business tax gap will be published later this year.

The CRA released the first report in June 2016. It was a conceptual study that defined the tax gap. The study presented the challenges involved in estimating the tax gap and it provided details about how tax gap estimates can be used in administering taxes. The study also described tax gap estimations in other countries.

A second report, published in June 2016, provided an estimate for the goods and services tax and harmonized sales tax gap. With support from the Department of Finance, this report estimated the tax gap to be $4.9 billion in 2014, with the federal component accounting for $2.9 billion.

The third report, published in June 2017, estimated the domestic personal income tax gap to be about $8.7 billion in 2014. This amount included both the tax gap related to the underground economy, $6.5 billion, and payment of taxes, $2.2 billion.

Most recently, the fourth report, which was released in June 2018, focused on the international tax gap and compliance results for the federal personal income tax system. It estimated the international personal income tax gap to be between $800 million and $3 billion in 2014.

I will take a moment to highlight in greater detail some of the information that was brought to light as a result of the release of the fourth report on the international personal income tax gap.

In the fourth report, the CRA worked to define how it measures the international tax gap. Essentially, the report sets out to help Canadians understand our international tax obligations. The report explains Canada's reporting obligations and voluntary compliance, as well as reports on audit activities related to international non-compliance. It also estimates the tax gap related to offshore investment income, in addition to describing the end results of the CRA's compliance tools, activities and results.

Defining the issue was crucial to helping Canadians understand the international tax gap. Without a doubt, this is a complex issue, and it can be extremely difficult to measure non-compliance internationally given the sophisticated methods some individuals use to hide their income and assets.

It is also important to note that Canada was recognized as the first of the G7 countries to publish its study of the international tax gap using a new method. The method was developed using a collaborative approach that included offshore financial and banking data to estimate tax loss due to unreported investments hidden offshore.

Moreover, the CRA works closely with experts and international partners from the United Kingdom, United States, Denmark and Australia to develop robust methodologies to assess the different components of the tax gap. As I mentioned, international tax schemes are more sophisticated and more complex than ever. I cannot overemphasize the importance of strong international relations and partnerships to tackle tax evasion and aggressive tax avoidance on a global scale.

Canada is well regarded for our contributions internationally. We take the opportunity to share expertise and learn from the experience of other countries to understand the global intricacies of tax evasion and aggressive tax avoidance. In fact, Canada is one of more than 65 nations that send out and receive country-by-country reports. Shared automatically, these reports provide countries with access to information about multinational corporations' activities in every country in which they operate. Once analyzed, this information provides great insight into the operations of large companies.

The common reporting standard is another tool used to gain access to information on Canadians' overseas bank accounts. With this system, Canada and close to 100 other countries exchange financial account information. This information helps identify instances where Canadians hide money in offshore accounts to avoid paying taxes, which is a key concern shared by Senator Downe, the government and indeed all Canadians.

I want Senator Downe and all parliamentarians to know that the government is working hard to study and release information on Canada's tax gap. This is a key part of the CRA's commitment to a fair tax system that meets the needs of all Canadians.

Information collected to assess Canada's tax gap allows the CRA to skilfully target our compliance activities and ultimately improve the integrity of the tax system.

Fairness for All Canadian Taxpayers ActPrivate Members' Business

April 3rd, 2019 / 6:15 p.m.
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Pat Kelly Conservative Calgary Rocky Ridge, AB

moved that Bill S-243, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax), be read the second time and referred to a committee.

Mr. Speaker, right now, Canadians are busy collecting tax slips and preparing to file their annual income tax returns. Despite the fact that no Canadian loves to pay income tax or particularly enjoys the act of complying with an increasingly onerous tax system, we can take comfort and pride in knowing that we live in a country where most taxpayers honestly report their income.

Respect for the rule of law is a foundational Canadian value. However, the biggest threat to a culture of compliance is the notion that other people or businesses do not comply, so tax evasion threatens the legitimacy of the entire tax collection system. If Canadians see that some Canadians succeed in evading taxes, other Canadians will resent that they are paying and complying, because they know they will have to pay even more as a result.

This past fall, the Auditor General tabled a report that pointed out the challenges that the Canada Revenue Agency has faced with collecting taxes from those who have offshore transactions. The Auditor General found that people or businesses with offshore transactions were given months or even years to comply with requests for information from the Canada Revenue Agency, and sometimes had their cases dropped with zero taxes collected or assessed. This is while regular Canadians are automatically reassessed and penalized after 90 days if they fail to respond.

The report from the Auditor General confirmed what many Canadians have suspected, and that is that there is a serious problem with offshore tax compliance and that some wealthy people have advantages that normal Canadians do not when it comes to avoiding taxes.

While compliance is the norm in Canada, some will under-report their income and others will not file returns at all. The underground economy of unreported cash transactions and the use of overseas tax havens are assumed to create a multi-billion dollar gap between what the law requires Canadians to pay and the amount that the Canada Revenue Agency actually collects. I say “assumed” because there is no real estimate of this gap. Bill S-243 seeks to measure, report on and hold the CRA accountable for its efforts to eliminate this tax gap.

As the opposition shadow minister for national revenue, I am pleased to join a multi-party effort to address the tax gap by sponsoring Bill S-243 in the House of Commons. The bill was introduced in the other place by Senator Percy Downe of Prince Edward Island, was amended at the Standing Senate Committee on National Finance and was passed with all-party support. I hope colleagues from all parties will support and swiftly pass the bill in the House of Commons as well.

In my remarks today, I am going to address what the bill would do, what it would not do and why it would be important for Canadians.

Bill S-243 would do three things. It would require the Canada Revenue Agency to publish distinct lists for convictions for both domestic and overseas tax evasion; to calculate and report on the income tax gap; and to give the Parliamentary Budget Officer information needed to calculate the tax gap for an independent assessment.

The bill starts by instructing the Canada Revenue Agency to publish distinct and detailed lists of convictions for tax evasion within Canada and overseas. As the Panama and paradise papers demonstrated, overseas tax evasion is a significant problem for Canada.

Canadians might be shocked to know that years after the revelations contained in those date leaks, no charges have been laid. They might also be shocked to know that according to the Canada Revenue Agency's own information, there have been less than a dozen successful prosecutions for tax fraud and evasion in the past year, and that is in a country with some 30 million annual tax filings.

Law-abiding taxpayers deserve to know what the government is doing to enforce the law equally and to crack down on Canadians who illegally hide money overseas as well as those who refuse to report their income at home.

Presently, it is difficult to find such information and details are not provided. Publishing two separate lists would help Canadians understand the extent of overseas tax evasion and would spur efforts by the Canada Revenue Agency to bring cases to trial in a timely manner. Canadians should never feel that the wealthy and well-connected can evade income tax without consequences.

Bill S-243 would also require the Minister of National Revenue to calculate and report on the income tax gap every three years. This would allow the CRA three years in which to gather all applicable data, analyze it and release a reasonable estimate of the difference between taxes owing under the Income Tax Act and those that it actually collects.

Analyzing and calculating the tax gap is an involved process which will take time. Therefore, a three-year reporting cycle would ensure that measurement and reporting would not consume a disproportionate amount of the CRA's resources. The three-year cycle would also allow time for increased efforts to combat tax evasion to take effect and for a long-term trend line to be plotted.

Finally, the bill would instruct the minister to collect, compile, analyze and abstract statistics on the income tax gap and provide that data to the Parliamentary Budget Officer. As such, he could verify the CRA's work and offer an independent opinion on the tax gap. Combined with CRA's reporting, this should allow a reasonably accurate estimate of the tax gap to be charted.

Bill S-243 would mandate that the minister consider certain factors in calculating the gap, such as the value of reassessments as a result of audits on individual, corporate and trust returns and the rate of incorrect returns that were not detected until being audited. However, it would not limit consideration to only these factors. It explicitly states that the calculation of the tax gap would be based on such factors, but with flexibility to consider other things as well.

The bill does not address tax avoidance schemes that are legal under the Income Tax Act or instruct the CRA to calculate potential revenue from amendments to the Income Tax Act. This bill would not mandate particular tax compliance efforts or targeting of any classes of taxpayer for greater scrutiny. It only aims to gather the evidence on which to base tax collection decisions, and it would leave those decisions to the government of the day.

The bill would not infringe on the privacy of Canadians. Likewise, material that the CRA must share with the Parliamentary Budget Officer would be subject to privacy protections that would prevent identification of individual taxpayers. This bill would not create new taxes, modify existing taxes nor change tax treatment. The bill is an effort to identify the extent of tax evasion to ensure that existing laws are being equally enforced.

I would like to address some of the observations raised by witnesses at the Standing Senate Committee on National Finance and by stakeholders with whom I have consulted.

Witnesses pointed out that Bill S-243 could make Canada a world leader in legislating measurement and reporting on the tax gap. Other countries are experimenting with measurement methodology, but none have written the reporting requirements into law. Canada has an opportunity to be a world leader in understanding the scope of its tax evasion problem and be better equipped to address it.

This is a problem that faces countries throughout the world. It is not unique to Canada, but Canada can and should take a leading role in addressing this problem.

Despite the fact that such reporting is new, I am confident that Canada's public servants are up to the challenge of developing a practical methodology over the next three years.

A further suggestion made at committee involved giving the Parliamentary Budget Officer access to anonymized underlying tax data instead of just the CRA's own analysis of tax data. This would allow the PBO to generate a more precise independent opinion, but it would require amending the Income Tax Act to address privacy protections. While I agree that greater precision from the PBO is desirable, such an amendment is beyond the scope of the bill.

Some witnesses thought Bill S-243 did not go far enough. They thought it should be expanded to include measuring tax avoidance in general rather than just tax evasion and that it should address evasion of other taxes like the goods and services tax and excise on liquor and tobacco. The bill targets only the gap between income taxes legally owed under the Income Tax Act as written and income tax revenue collected. Measuring tax avoidance would be more complex than the measures contained in this bill and would have to be left to other legislation in the future.

Witnesses also told the committee that participants in the underground economy often evaded multiple taxes at once. A business that neither collects nor remits GST, for example, almost certainly fails to report the income it receives.

I agree that other forms of evasion involving GST or excise duties such as contraband tobacco should be measured and reported as well for an accurate picture of the overall general tax gap. However, income tax is a reasonable place to start to measure the tax gap. Right now none of this is measured at all, so at least this bill we can begin to measure the tax gap by starting with income tax.

Personal and corporate income taxes account for two-thirds of the total tax revenue, so this is a good place for us to start. There is certainly nothing in the bill stopping a future Parliament or a future government from expanding the measurement and reporting system to include other taxes and duties at a later date.

Some stakeholders raised concerns that moves to measure and report on the tax gap would spur efforts by the agency to target law-abiding taxpayers, particularly small businesses, with sterner enforcement measures. I understand this concern and in general I share it, but I think that it is misplaced in the case of the bill.

The issue of overzealous tax collection measures is a separate issue and it is one that this Parliament could have dealt with by establishing a legislated duty of care between the agency and taxpayers. However, the House chose not to do so when Motion No. 43 was voted on in September 2016.

The bill seeks to improve Canada's ability to measure how effective our revenue collection and law enforcement systems are. It seeks to promote better governance through better information. The issue of the CRA's treatment of law-abiding taxpayers is a separate unrelated issue.

The proposed bill does not mandate any particular enforcement actions. It does not single out any class of taxpayers for further attention. It does not amend income tax policy to close perceived loopholes or to raise anyone's tax burden. It is simply a measure to uphold the rule of law. It aims to gather the information needed to ensure that all Canadians comply with the law, that no one can evade it due to wealth or overseas connections and so increase the burden on those who comply.

By requiring the CRA to post distinct lists of both foreign and domestic tax evasion convictions, it will likely focus greater compliance attention on overseas tax haven use. That is good news for honest Canadian businesses.

Bill S-243 would improve Canadian governance through better information. It would allow Canadians to see how effective tax collection and law enforcement efforts are and to demand better. It would provide successive governments the information they need to address domestic and overseas tax evasion more effectively and to provide the impetus to give offshore tax havens the enforcement attention they need. It would provide the evidence for evidence-based policy making. It would demonstrate Parliament's commitment to the rule of law and to treating Canadians equally and permitting none to cheat, thus increasing Canadians' overall confidence in our institutions. It would increase accountability from the Canada Revenue Agency through independent reviews by the Parliamentary Budget Officer.

This is important for small businesses, which often feel like they are the lowest hanging fruit for tax compliance scrutiny. They have watched as the Auditor General has pointed out how those with overseas transactions are sometimes given months or years to comply and maybe have the case thrown out, while a small business person with only domestic business has only 90 days. It is important for law-abiding taxpayers of more modest means to see that the wealthy and well-connected using tax havens are brought to justice. This is important for large companies and wealthy individuals to know that Canada upholds the rule of law.

No one likes paying taxes, but Canadians like cheaters even less. The bill would show Canadians that parliamentarians of all parties take such cheating seriously. It would show them that Parliament takes steps to understand the scope of the problem to better address it.

Therefore, I encourage colleagues from all parties to support the bill, grant it swift passage through the House and ensure that we maintain our culture of compliance and a culture where people believe in their institutions, have confidence in their institutions and are willing to comply with the tax laws that currently exist.

February 7th, 2019 / 12:55 p.m.
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Ms. Linda Lapointe (Rivière-des-Mille-Îles, Lib.)

The Chair

There are two bills in the chart of items added to the order of precedence: Bill S-243, from Pat Kelly, and Bill S-248, from the Honourable Hedy Fry.

Have you had an opportunity to read them over?

Canada Revenue Agency ActRoutine Proceedings

December 13th, 2018 / 10:05 a.m.
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Pat Kelly Conservative Calgary Rocky Ridge, AB

moved for leave to introduce Bill S-243, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax).

Mr. Speaker, it is indeed my pleasure to introduce the fairness for all Canadian taxpayers act, measuring the tax gap to fight international tax evasion.

This bill is a common-sense measure that will help ensure accountability to parliamentarians as we fight tax evasion, in particular international tax evasion, something that I am sure is very important to all Canadians. Indeed, I hope I will have the support of all parties in this matter, because I am sure that most parliamentarians would take very seriously the issue of tax evasion and would like to see increased measures to ensure accountability for the agency as it combats international tax evasion and avoidance.

(Motion agreed to and bill read the first time)

Message from the SenateGovernment Orders

November 27th, 2018 / 5 p.m.
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The Assistant Deputy Speaker NDP Carol Hughes

I have the honour to inform the House that a message has been received from the Senate informing this House that the Senate has passed the following bills, to which the concurrence of the House is desired: Bill S-243, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax) and Bill S-248, An Act respecting National Physicians’ Day.