Finance Committee on May 5th, 2016

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you, Chair.

From the outset today, the chair has represented that this is a major issue for us. I don't want to diminish this issue of the KPMG news reports, which is being carried mainly by the media. We heard from the KPMG representative earlier this week, and I will refer to that, but I just want to set the context of my remarks.

There are Canadians who are extremely concerned about this issue. While there is no question about that, I can count on one hand the number of inquiries—actually there were two—that have been made to my office about this issue. It's perhaps not as broad an issue at my constituency level, and I'm just speaking for myself before I begin my remarks, but I just wanted to say that and to set the record straight for myself on that particular front.

According to some of the background we've received, Canadians in general are tax-compliant, and they file their taxes. They pay their taxes. Something in the neighbourhood of 95% of Canadians do that correctly. Is that right?

[Andrew Treusch]

I believe it's over 92%, but, yes, we have one of the highest voluntary compliance rates in the world. It's an important observation you make, sir. It's one of the most important measures of a tax system that is accepted by Canadians as fair and just.

[Phil McColeman, Conservative, Brantford—Brant, ON]

How frequent are amnesty agreements made within the CRA? Are they one-offs or are there quite a few of them?

[Andrew Treusch]

You'll recall, sir, that I spoke about the instances of litigation cases. We have about 5,000. We have settlements in 3,000 of those cases, and 2,200 go to court.

Let me say for the record that we do not characterize the KPMG file as an amnesty. That is a term that has been applied by the media. It is not one we accept. This matter remains before the court. We are determined to continue to get all of the participants in this scheme, and we want our day in court. Our work is not done.

The minister announced as well that there is additional work on the Isle of Man. The scheme is on the Isle of Man. We are now under way with what I would describe as a blitz on Isle of Man accounts, up to 800 of them.

I will ask Mr. Gallivan to speak in general about the terms of settlements and about why amnesty is an inappropriate description.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Could I move on? I have only a limited time. I appreciate what you are saying. If you choose to give that explanation at a later time when it fits in, please do so.

Without this agreement with KPMG and the negotiation, or whatever it turns out to be.... In my experience of having been in business for myself, and having been audited over several different points in time, if there are inconsistencies in how we have filed our taxes and such, typically the CRA people are very reasonable with us in terms of correcting those situations and moving on in a negotiated way. I would characterize my experience with CRA that way.

Without this agreement with KPMG clients, do you think the CRA would have been able to recover the taxes owed by these individuals?

[Andrew Treusch]

That is a very interesting question. I have asked myself whether going back in time.... If we had had all the tools and information sources available to us today, we may well have been more successful. That is probably a question I should invite Mr. Gallivan to address.

[Ted Gallivan]

I can't comment on a specific taxpayer file. I can speak, though, in general terms about the agreement that is posted to the CBC website and how the CRA generally reaches those kinds of agreed-to settlements.

In such cases, payment within 60 days is a clause in such agreements, guaranteeing that the agency would be paid. I would also point out that the agreement on the CBC website talks about 15 years, in other words going back 15 years. Back to your earlier remarks regarding the CRA, in a traditional compliance review, we look at one tax year. Let's fix the mistake, and let's move forward, back to the voluntary compliance.

In our audit program, we do 120,000 audits. We usually look at one to four tax years. Let's clean it up. As with the statute of limitations, we have statute-barred. We can go back only so far.

In the case of aggressive tax planning—the people who engage in tax shelters and those kinds of moves—we actually have the right to go back six years. We go back six full tax years and charge compound interest. A careful reading of the document posted to the CBC website, which I can't confirm is an actual offer of agreement, would indicate that we went back 15 tax years. That would be consistent with CRA's approach to offshore tax evasion, the most serious kind of non-compliance that we detect. We vary our approach based on the seriousness.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Thank you.

In general terms, does that mean that Canadians can expect this practice to continue as the policy of the CRA, to be in the situation where you would bring forth these types of negotiated settlements?

[Andrew Treusch]

Without taking the committee's precious time, I would like to refer to the entirety of my remarks at the outset. We have sources of information we have never had before, perhaps the most critical being that any international electronic fund transfer of $10,000 or more is now known to us. This new tool just came to us in January 2015. That is what enables us to tackle the Isle of Man, along with—

[Phil McColeman, Conservative, Brantford—Brant, ON]

Can I interrupt you, sir? I know my time is running thin.

[The Chair, Liberal, Wayne Easter]

It is practically out. One quick question....

[Phil McColeman, Conservative, Brantford—Brant, ON]

In essence, what you are saying is that, over the last five years, the new tools that are available to CRA have been working very effectively. Is that correct?

[Andrew Treusch]

Well, some of these tools don't go back five years. Some of them go back three years; some go back one year. Most important, now we have the financial resources to put the effort into it.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Mr. Dusseault, go ahead.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

Thank you for being here.

First, I would like to ask whether you can provide the committee with the letter that is on the CBC website, so it can be official and it can be provided to each committee member.

[Andrew Treusch]

I am prevented by law from doing so, sir.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Okay. Thank you. To follow up, I would like to know whether you think that the tax scheme by KPMG.... In your opinion, is it legal?

[Andrew Treusch]

Canada Revenue Agency uncovered this scheme through our actions. Our characterization of the scheme is in the public record and that, again, could easily be forwarded to the committee.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

But do you think the scheme was legal when it was implemented by KPMG?

[Andrew Treusch]

We would not have gone into litigation if we didn't have concerns about this scheme, and it's why we continue to pursue every participant in the scheme.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So the scheme wasn't legal, if you want to pursue a court case.

[Andrew Treusch]

We are in court to obtain information on every participant, to ensure that the taxes assessed are paid in full and that Canada's tax laws are upheld.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

If you think that scheme is not legal, why would you send a letter to KPMG to transfer it to their clients, to have an amnesty? I call it amnesty because in the dictionary it says....

In the French dictionary, amnesty is defined as an undertaking by the government to retroactively erase the punishable nature of the offence to which it applies. Depending on the case, amnesty may prevent or quash public prosecution.

If you think the scheme is not legal, why would you send an amnesty letter to taxpayers instead of pursuing this in court?

[Andrew Treusch]

We are pursuing it in court. I respectfully disagree with the characterization of amnesty.

As a common-sense test, if any of your taxpayers were approached by the Canada Revenue Agency and asked for an assessment of taxes owing and interest over 15 years, paid within 60 days, I don't think your constituent would characterize that as an amnesty.

Mr. Gallivan.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

If you think it's an illegal scheme and the taxpayer signed that offer, if the taxpayer received your letter by KPMG and signed that letter, you still have the power to pursue them in court and take all the money and the penalties and the interest.