Finance Committee on Feb. 5th, 2013

[Terrance McAuley]

In terms of the definition, every taxpayer in Canada is entitled, within the purview of the Income Tax Act, to reduce and minimize their tax. There is an element of tax planning that is permissible. What we find is that there is a point in time where the tax planning becomes aggressive, and then it moves into the tax avoidance area, where the spirit of the act has been broken but the letter of the act is correct, as opposed to tax evasion, where you find a taxpayer who has purposely attempted to hide income, for example.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

That is, of course, what you're attempting to do.

You used the figure $4.6 billion since 2006. Just by way of example, what would a comparable figure be for 2004-05, as far as collection goes?

[Terrance McAuley]

I do not have those figures with me. I can certainly attempt to get them.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Did it surprise you to find out that it was $174 million in 2005? Would that be correct?

[Terrance McAuley]

I cannot speculate.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Would it be fair to say that the enforcement and compliance part of your department has become more aggressive? Would it be fair to say that since 2005 or 2006, since the Conservatives came into power, there has been a tremendously larger focus on this particular part of the department?

[Terrance McAuley]

This is definitely a focus for the agency. Aggressive international tax planning is the number one priority for the agency, and has been the focus.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Has long has that been for, sir?

[Terrance McAuley]

It certainly has been for as long as I've been with the agency, which is four years now. I can't speak to the situation before then.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

In fact, voluntary disclosure by taxpayers has actually increased somewhat dramatically as well. Is that fair to say?

[Terrance McAuley]

Yes, sir. The number of voluntary disclosures has increased substantially over the last five years. Domestically they're up by about 60%, and internationally the disclosures we're receiving are up by well over 140%.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

By my gross calculation I will just advise you that my understanding is that $174 million was collected in 2005, and about $766 million has been collected per year since that same timeframe. That's almost five times more per year.

Have you seen an increase in international cooperation since you've been in the department? I understand, of course, that it's a very important part of the collection and compliance part of the act that we put together.

[Terrance McAuley]

Yes, the agency participates heavily in cooperation and collaboration with other jurisdictions. The Forum on Tax Administration has put a public focus on countries collaborating and cooperating with each other, and Canada participates heavily in the OECD. We participate heavily in the joint international tax shelter initiative and other programs designed specifically to develop cooperation between countries.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

In fact, with this new cooperation and the international treaties, I understand we have now about 100 tax agreements worldwide. With this change we are tightening the noose on those people who would try to evade taxes. Is that fair to say?

[Terrance McAuley]

There are fewer and fewer places to hide money now, yes.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Would the RCMP have anything to add in relation to compliance and how we're doing relative to what we were doing six or eight years ago?

Mr. Cormier.

[Insp Jean Cormier]

I actually looked at statistics yesterday in preparation for appearing here today, and I can state that in regard to the change in legislation we had in 2010, we are now getting reports—for example, from FINTRAC, which is reporting suspected cases of money laundering involving tax evasion—that show that the new legislation that has been put in place is working.

In the past, those matters would not have been reported to us.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Excellent. Thank you very much, sir.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you to each of you for joining us today.

Following on the work of Senator Percy Downe on this file, there was an ATIP to CRA, and according to the CRA documents, the commitment by the previous government in 2005 of $30 million in additional resources to address aggressive international tax planning allowed CRA to assess over 5,400 cases between 2005 and March 31, 2009, with the total fiscal impact of $2.7 billion. It was a $30 million investment of resources that yielded $2.7 billion.

How was that investment used? How was that targeted? It seems to have been quite successful.

[Terrance McAuley]

With regard to the funding that was received in 2006, 80% of that funding went into audit directly and 20% went into research. We are finding that research is a tremendously important part of dealing with aggressive international tax planning.

[Scott Brison, Liberal, Kings—Hants, NS]

That's interesting.

Are you suggesting that perhaps the research investment, the 20%, actually may have yielded a greater result, potentially, than the audit function?

[Terrance McAuley]

The research component is designed to obtain information domestically and internationally on potential schemes. We have created centres of expertise that actually receive that information and review it, the view to which, if that problem exists in Canada, is to identify what the indicators are that a scheme is out there, and then identify the taxpayers and provide that information to the audit community so that the audit community, in the course of doing an audit, will be able to identify if there is aggressive international tax planning.

[Scott Brison, Liberal, Kings—Hants, NS]

The research in some ways would have been identifying, if it were a positive activity, best practices, but in this case, I suppose, you could say the worst practices of international tax evasion.

[Terrance McAuley]

The focus, again, is to simply understand these plans and get that information to the auditors.