Finance Committee on June 19th, 2006

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chairman.

Good afternoon. The committee is reviewing the first five years of the application of the Canada Revenue Agency Act, from 1999 to 2004.

I'd like to focus on a specific point: tax transactions in terms of offshore transactions. Have you done an assessment of that? You said that there was some research underway, that the agency wanted to estimate losses of federal tax revenue potentially resulting from tax evasion practices involving offshore transactions. Has the agency come up with an amount? Are you aware of that?

[Sheila Fraser]

We don't have any specific amount, to my knowledge. In the 2002 report, I believe we mentioned that it amounted to hundreds of millions of dollars, but no specific figure was given. I don't know whether the agency has a more exact number for you.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Do you think that the act is effective enough in that regard, or should we make an amendment to enable the agency to identify and thwart tax evasion practices involving offshore financial transactions? Would there be any point in making such an amendment to the act?

[Sheila Fraser]

As I said earlier, we are reluctant to suggest amendments to legislation. However, in 2002, we did indicate that the Department of Finance should analyze the impact of certain transactions, identified in our report, and see whether the act should be changed.

I believe we will be reporting on an audit of issues relating to treaties and so on, next year. We'll see whether there have been any changes or new developments.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

You said that in the 2002 report, it mentions that this probably amounts to hundreds of millions of dollars.

[Sheila Fraser]

That was over 10 years or so.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

For 10 years in total, or from year to year?

[Sheila Fraser]

No, in total.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

All right.

In answer to a question from my colleague, you said that there was an audit underway on this issue. You will be making a report, possibly next year. Could we have the data, in order of magnitude, on what you have identified? Is there a problem? Do you think the department should pay particular attention to this issue?

[Sheila Fraser]

It's still far too early for that. We are in the beginning stages of the audit. The department may have some data for you, but we do not currently have any.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Is it a growing industry?

[Sheila Fraser]

Unfortunately, we can't answer that question.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Okay, you have no information on that.

[Sheila Fraser]

We will give you the answer next year.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Yes. It's an issue of concern to us. However, in your 2002 report, you mentioned $200 million. What does that represent for Canada in one year, in terms of tax evasion? Should that $200 million normally have been recovered?

[Sheila Fraser]

We talked about hundreds of millions of dollars over a 10-year period, without giving any other details.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Hundreds of millions of dollars. All right.

[Sheila Fraser]

We said that it was tax revenue that was beyond the grasp of Canadian authorities.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Apparently that tax evasion was allowed under the current act.

[Sheila Fraser]

Exactly.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

It's not necessarily illegal.

[Sheila Fraser]

No. They were legal acts, consistent with the act. We recommended that the Department of Finance review the impact of certain provisions of the act that allowed this type of transaction and tax avoidance.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

All right.

According to my information, the Department of Finance has not done those analyses. Do you have any other information?

[Sheila Fraser]

To my knowledge, the department has not yet done those analyses. That is something that we will look at in our audit.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

That should be released next spring?