Thank you, Chairman.
My name is Brian Ernewein. I'm the general director in the tax policy branch of the Department of Finance, and I'm joined by a few of my colleagues from the department, who may join us at the table if a question should arise.
I appreciate the invitation to appear before the committee again today to discuss tax evasion and tax avoidance. This gives me the opportunity to report to the committee on the government's most recent efforts, both domestically and internationally, to address various aspects of those issues.
I propose to briefly highlight some of the policy initiatives that we have undertaken in the recent past to combat tax evasion and tax avoidance. My remarks will first be about tax evasion and then move on to tax avoidance.
Tax evasion and combatting international tax evasion—I take that to be more the focus of the committee, but perhaps the questions will take us in different directions—primarily concerns the vigorous enforcement of existing tax rules by the Canada Revenue Agency. You'll be hearing from my colleagues at the agency about their experience in the administration and enforcement of Canadian laws. We take as a given that CRA's enforcement of our laws requires that the agency be provided with the right tools and be allocated sufficient resources to pursue those efforts.
Access to relevant taxpayer information is key to the effective enforcement of our tax laws. Internationally, bank secrecy laws are a significant obstacle to the exchange of tax information between tax authorities. In order to overcome that obstacle, it is important to have access to information on taxpayers who seek to avoid their tax obligations, especially in jurisdictions that maintain bank secrecy.
When I last appeared before this committee, in December 2010, I talked about the budget 2007 measures to improve tax information exchange and Canada's efforts to promote the OECD standards in transparency and effective information exchange. They have led to the negotiation of tax information exchange agreements and new or revised tax treaties.
I'm pleased to report that we've achieved significant progress in this regard since we were here a couple of years ago. Canada now has 16 tax information exchange agreements, or TIEAs, as we call them, in force, and is currently negotiating over a dozen more. Last week, we signed a TIEA with Liechtenstein, and we hope to be signing another later today. Almost all of Canada's 90 tax treaties currently in force now include the OECD standard on tax information exchange.
Of particular significance, the tax treaties that Canada has with other countries, which were identified as requiring changes during the Global Forum's peer review—and I'll talk in a moment about the Global Forum—have been or are being renegotiated.
We've had an amending protocol on exchange of information with Singapore that came into force in 2012. We have amending protocols with Austria, Barbados, Luxembourg, and Switzerland that have all been signed, and we have negotiations with Malaysia and Belgium that are in progress. From our perspective, a developed tax information network is an important cornerstone in combatting international tax evasion, and we're working to negotiate many more similar agreements in the future.
I said I'd talk for a second about the Global Forum, and I'll just take a second on it. The so-called Global Forum on Transparency and Exchange of Information now has 100 members—countries and subnational jurisdictions. It conducts rigorous peer reviews of the legislative framework and administrative practices of member states, including jurisdictions with which Canada has entered into TIEAs, or renegotiated tax treaties. This peer review helps ensure that Global Forum members abide by their obligations to exchange information in the manner that those TIEAs and tax treaties contemplate.
I'll say quickly that on the domestic front there are tools we can use to help the CRA in its work on dealing with tax evasion. One important example that's been in place for several years now is the Income Tax Act's foreign reporting rules, which require the disclosure of the value and location of property held outside Canada. These rules assist the CRA in detecting tax avoidance and evasion, and help to better target the CRA's audit efforts, both for individuals and for companies that own subsidiaries outside of Canada. These reporting obligations are backed up by penalties for failure to file the required return.
Finally, on the tax evasion front, additional funding has been provided to the CRA in past budgets in support of their enforcement efforts, particularly as regards international taxation and for the purpose of creating tax planning centres of expertise.
Moving over to the topic of tax avoidance—and I can be a little bit briefer on this point—I'd like to make mention of only recent initiatives that the government has made to address domestic and international tax avoidance. While tax evasion generally refers to the wilful concealment of income from taxation, tax avoidance is more in the nature of aggressive tax planning arrangements that reduce or eliminate tax, or purport to, which are presented as being consistent with the letter of the law but which produce results that are unintended and inconsistent with sound tax policy principles.
The government has put forward a large number of changes designed to address avoidance concerns and improve the integrity of the system. Just dealing with a few examples coming from the past year, Budget 2012 introduced measures to address aggressive tax shelters, to improve the integrity and fairness of our thin capitalization rules, and to restrict foreign affiliate dumping.
The second example, or list of examples, I will give you comes from Bill C-48, which is currently before the House. The Technical Tax Amendments Act does a lot of things. Among these, it contains legislative measures to give effect to a number of changes that were proposed in Budget 2010 to address aggressive tax avoidance transactions and to improve the integrity of the tax system. These included rules dealing with foreign investment entities and non-resident trusts, a reporting regime for aggressive tax planning transactions, and specific rules dealing with what were so-called foreign tax credit generators.
Just referring to those examples, I think they serve to show the tax system is being regularly reviewed and updated to address issues of tax avoidance. It's obvious that we must remain vigilant in identifying and pursuing issues as they arise, with a view to ensuring the fairness and integrity of the tax system.
Thank you.
