Thank you for this opportunity to comment on the parts of Bill C-31 related to tax havens.
We support the implementation of several measures that aim to go after tax cheats using tax havens that were announced in the 2013 and 2014 federal budgets, which are contained in Bill C-31. But we feel these limited measures do not go far enough in dealing with what is a growing problem. We would like to suggest some additional measures that should be considered if the government is serious about going after tax cheats using tax havens.
First of all, we welcome the improvements to the Canada Revenue Agency's ability to provide feedback to the Financial Transactions and Reports Analysis Centre of Canada and to law enforcement agencies. These are fairly minor changes, but they will help make enforcement more efficient. There may be some reduced privacy aspects here, but we feel they are justified in view of the social benefit as a whole.
Second, in terms of reporting, some of the changes on tightening up provisions and the regulation of electronic transfer of funds are also a welcome step, especially including casinos, which are a preferred method of money laundering. Tax cheaters and organized crime syndicates are always trying to find ways to circumvent the regulations, so it is logical that the government should be always trying to stay a step ahead and close off any holes in the monitoring system.
Third, on the offshore tax informant program, information from informants is one of the ways in which tax authorities are able to lift the veil of secrecy that is the hallmark of tax havens and identify individuals and companies that are evading paying their fair share of taxes. But we should not expect that this program is going to result in that many convictions.
The IRS Whistleblower Office in the U.S. just published a 2013 report that shows the U.S. collected $367 million as a result of whistle-blower information from just six cases last year. There were 12 cases in 2012, and a slightly larger amount of money was collected. Canada is roughly 10% of the U.S. economy, so we are not likely to see more than a few cases in a year.
The U.S. Whistleblower Office annual report also notes that cases typically take five to seven years from receipt of submission to be settled and claims paid, so it may be a number of years before we will see any tangible benefits to Canada.
Maybe the most important aspect of this measure may be the deterrent effect, which will be hard to quantify. But in order to maximize the deterrent effect of this measure, the government needs to do a more energetic job of public promotion and education. This is one program where spending some public advertising dollars, raising awareness about this program, would be justified.
The other issue that needs to be addressed is the protection of confidentiality of whistle-blowers coming forward. I have personally been contacted by several potential whistle-blowers who were seeking information on how they should go about accessing the offshore tax informant program, but were very worried about their safety. I know there are some provisions to protect tax confidentiality, but the CRA website does not give adequate assurance, and the government needs to do more to reassure potential informants.
The tax haven problem is growing, as we have recently shown in a Statistics Canada report on direct offshore investment abroad. They are up 10% over last year.
On some of the additional measures that we feel are needed, one would be to provide the CRA information needed by the Parliamentary Budget Office to complete a tax gap estimate. Second, increase the capacity of the Canada Revenue Agency to go after tax cheats. Third, make amendments to the general anti-avoidance rule to include a clear statement that economic substance is required in any transactions to be considered. Fourth, Canada needs to support substantive reforms of the international corporate tax rules that are being developed through the OECD base erosion and profit shifting process.
I'd be happy to answer questions about that, if you like.