Evidence of meeting #23 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cra.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ted Gallivan  Assistant Commissioner, International, Large Business and Investigating Branch, Canada Revenue Agency
Roch Huppé  Chief Financial Officer and Assistant Commissioner, Finance and Administration Branch, Canada Revenue Agency
Geoff Trueman  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

11:35 a.m.

Liberal

Steven MacKinnon Liberal Gatineau, QC

Thank you, Madam Minister and Mr. Gallivan for being with us today.

I will try to proceed in a more orderly manner. Minister, having spent this time with you, I see in you the Iron Lady of tax fairness. I know your sense of justice will guide your actions throughout your tenure.

That said, we are considering a very important issue. At the heart of this issue is tax fairness for Canadian taxpayers. The government has taken some unprecedented measures to invest in your capacity to investigate and collect taxes from companies and individuals.

We also have a client service issue to address. We all know that the CRA doesn't have the best reputation for client service. I imagine the people in your riding feel the same way. They do in mine. Could you describe for us how the amounts invested will be used to improve client service, collections, and tax fairness?

11:35 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

Thank you for your question.

I do, indeed, consider client service a priority. The fact that the Prime Minister chose a social worker as Minister of National Revenue was no mere happenstance. Since we're speaking to the issue of services to the public, I should mention that, for me, people who face greater challenges, and might not have their tax returns prepared by accounting firms, are important.

In the historic budgets we announced, we stressed the importance of improving telephone service as well. Many regions of Canada still don't have cellphone service or computer access.

And we want the public to be able to receive accessible, easy-to-understand documents by mail. This is particularly important given that 51% of Canada's population is functionally illiterate. This means that, when those people receive documents, they're unable to understand the contents.

With respect to volunteers, we need to see an increase in number, and they should be given much more support. The challenge is to help people who don't have the means to pay someone to fill out their tax returns. We're working on that.

11:40 a.m.

Liberal

Steven MacKinnon Liberal Gatineau, QC

Thank you, Minister.

My question is for you or perhaps Mr. Gallivan.

Is it true that in the past few years, and particularly the past year, the agency's accounts receivable have increased dramatically?

If so, could you tell us what accounts for that? I'm referring, of course, to taxes the CRA has not collected.

How will those investments help collect these amounts or result in collection agreements for past-due amounts?

11:40 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

The more technical aspect—

11:40 a.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Dusseault.

11:40 a.m.

NDP

Pierre-Luc Dusseault NDP Sherbrooke, QC

Point of order, Mr. Chair. I'd appreciate it if you could clarify a point.

The first hour was supposed to be devoted to the CRA's efforts to combat tax avoidance and evasion. But we've just heard an answer to a question about client service and accounts receivable.

Could you please rule on the relevance of our colleague's questions in the context of this study?

11:40 a.m.

Liberal

The Chair Liberal Wayne Easter

This question might be more appropriate to estimates during the second session. We may be straying a little bit from tax evasion in terms of our questions, but I would ask members to try to hold it close to the tax evasion issue during this first hour of debate.

Minister, I will allow you to answer the question.

11:40 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

Since your question is much more technical, Mr. Gallivan will answer it.

11:40 a.m.

Assistant Commissioner, International, Large Business and Investigating Branch, Canada Revenue Agency

Ted Gallivan

You're correct that there are a number of factors that have increased the volume of accounts receivable at the CRA. One is aggressive compliance action such as the document posted to the CBC website that talks about going back 16 tax years. That's exceptional, and it really does ramp up the bill the taxpayer has to pay. In that 50% penalty, the gross negligence penalty that we apply very seldom goes back 16 tax years, and applying a gross negligence penalty is something that we do in a fraction of 1% of cases. We save that for the most serious types of non-compliance. Now when we do that, it does inflate the bill, and budget 2016 did provide us the resources to make sure we collect those assessments.

11:40 a.m.

Liberal

Steven MacKinnon Liberal Gatineau, QC

Hence the relevance of my question, Mr. Chair.

11:40 a.m.

Liberal

The Chair Liberal Wayne Easter

Time is up, Mr. MacKinnon.

Mr. McColeman.

11:40 a.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

Thank you, Mr. Chair.

Thank you for coming, Minister.

Would you say that the government's 2013 stop international tax evasion program was effective?

11:40 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

The 2013 program set a process in motion, in which the government determined that even more massive investments would be needed so that all amounts lost due to tax evasion and aggressive tax avoidance could be recovered.

11:40 a.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

Okay. I'll take that as an answer of yes, that it was effective, and you're building on top of what has been very effective. I believe it was reported three weeks ago that the program alone brought in $1.57 billion in the 2014-15 fiscal year, which was four times what was projected, and over the course of the program since inception, $2.6 billion has been recovered or brought in through the program without the investments that your government is prepared to make. Are those numbers correct?

11:45 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

I want to emphasize that the major investments that our government is making at this time show the importance we accord to the entire tax evasion and tax avoidance issue. These investments will enable the Government of Canada to hire many more people and modernize the tools needed to address a problem that's international in scope. Mr. Gallivan will be able to complement my answer in this regard.

11:45 a.m.

Assistant Commissioner, International, Large Business and Investigating Branch, Canada Revenue Agency

Ted Gallivan

The CRA shares the concern that this committee and Canadians have with offshore tax evasion. It is going to be a multi-year effort. The measures put in place in 2013 are helping the agency. From fiscal 2011-12 to the most recent fiscal year, the overall fiscal impact is up $2.6 billion per year, or 25%. The amount of revenue being paid voluntarily by corporations, as per the last Fiscal Monitor, is up 13.8%, and voluntary disclosures are up 400%. We have good momentum.

For sure, the measures introduced in budget 2016 will add to that, as does our international co-operation. This is a multi-year effort by a lot of countries working together, but we are clearly on an upswing.

11:45 a.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

That's good news, because I know that most of the agreements internationally had been worked on over the last number of years. Is it correct that they've taken some time to put together?

11:45 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

Indeed, international agreements have been drafted because countries noticed the problem is international in scope. And the agreements signed in Beijing last week evince a clear interest in dealing with the issue at an international level. This is why it's important that the government put all the necessary resources in place so that all Canadians can get back their fair share.

11:45 a.m.

Conservative

Phil McColeman Conservative Brantford—Brant, ON

I'm very respectful of that. I just want to be sure.

One last question, then. In your testimony today, you've indicated, I believe, that if the CRA were to, on a case-by-case basis, look at similar situations as KPMG presented to CRA, the same type of deal would be available on a case-by-case basis to anyone else. I believe that's what you indicated here today. I just want to confirm this with you, Minister. Am I correct in that testimony?

11:45 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

I will ask Mr. Gallivan to respond to the technical aspects of your question more precisely.

May 19th, 2016 / 11:45 a.m.

Assistant Commissioner, International, Large Business and Investigating Branch, Canada Revenue Agency

Ted Gallivan

When it's at litigation with a taxpayer and a settlement is proposed, the CRA has an obligation to maximize value for the taxpayers. We will look at the strength of our case. We will look at the legal precedents. We'll look at the point of principle.

Sometimes we stand on principle and we risk coming away with nothing. In other cases, the offer that's on the table may present more value for the Canadian taxpayer. If we're going after $10 million and there's $8 million available, $8 million into the social service industry can be the best value for the Canadian taxpayer. If we're concerned about the legal precedents, we often get advice from the Department of Justice. We get advice from internal experts, and we'll make a decision.

We have roughly 200 cases before the courts, and we would be open to settling.

11:45 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, both.

Mr. Grewal.

11:45 a.m.

Liberal

Raj Grewal Liberal Brampton East, ON

Thank you, Mr. Chair.

Thank you, Madam Minister, for coming today.

I think the issue goes to tax fairness. Tax avoidance and tax evasion are still under the umbrella of tax fairness, ensuring that all Canadians, corporate and personal, pay their fair share. It's also equally important on the concept that CRA treats each taxpayer fairly and provides equal levels of service.

I'll get to that question in my second round because Madam Minister is here and talking about tax avoidance and tax evasion.

We're currently party to 22 tax information exchange agreements. The Prime Minister and the minister have said that tax evasion is an international problem and we really need to work with jurisdictions that have low tax or zero tax in order to solve this problem. It's not just what the CRA does, but also what we do at an international level.

Madam Minister, can you talk to us a little about the benefits and the risks of Canada signing these tax information exchange agreements? We also have to give information about Canadian taxpayers when other jurisdictions ask for it.

11:50 a.m.

Liberal

Diane Lebouthillier Liberal Gaspésie—Les-Îles-de-la-Madeleine, QC

We must work internationally, to ensure our partners can exchange information under the agreements.

Mr. Gallivan should be able to answer this by providing an update.

11:50 a.m.

Assistant Commissioner, International, Large Business and Investigating Branch, Canada Revenue Agency

Ted Gallivan

From a CRA perspective, you're correct. Transparency is key, and there can be legitimate reasons to move money back and forth internationally, or have holdings and pay the full tax due.

Step one is transparency, and that's what these agreements go to. There are now 101 countries internationally that have committed through the global forum to moving toward what the global standard is on full transparency. In terms of exchange of information, I can tell you there's a robust regime of independent review and tiers. Countries that are participating under the global forum engage in these third-party reviews to have their protection of taxpayer information assessed, and they go through levels. What the CRA does, in consultation with Finance and IT experts, is assess the risk to Canadian taxpayer data when we decide which jurisdictions we exchange with.