Finance Committee on June 16th, 2020

[Ted Gallivan]

We have confirmed publicly that we have a small number. I believe we have confirmed publicly that there are five criminal investigations under way. At this point, given people's legal rights and the aggressive criminal defence in these cases, we haven't brought any to charges laid.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay, thank you. I just wanted a quick answer.

Now the Paradise papers are also listed here with hundreds of Canadian corporations. How many corporations in the Paradise papers have been charged?

[Ted Gallivan]

Again, I think we haven't confirmed publicly the exact number that we have under criminal investigations. I think the point needs to be made, though, that many of these sophisticated taxpayers paper over their tax planning with multiple legal opinions and law firms. I think there's no lack of willingness on the part of CRA to pursue these cases criminally; I think it's the forethought of the perpetrators to really paper over what they are doing to make it very difficult and complex to bring criminal charges.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

That's my point. So, nobody has been charged in the Paradise papers. I know for a fact nobody has been charged in the Bahama papers. On the Isle of Man scam, CRA's response was what? How many of the corporations involved have been charged?

[Ted Gallivan]

Again, I think in all four cases, Panama, Paradise, Bahamas and Isle of Man, 100% of the taxpayers' names were risk-assessed by the audit function. Based on the facts, the current jurisprudence and current Canadian law, we believe we took whatever action we could. In the case of Isle of Man, every single taxpayer who was found to be non-compliant with Canadian tax law has been put through audit, and both tax and gross negligence penalties are being levied. I would say that the facts of that situation have driven the CRA response.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay, I have a very quick question to end, Mr. Chair.

So, $27 million obviously is not enough, and draconian powers shouldn't be given to go after widows and students. They should be given to CRA so that the big tax cheats can be charged. It's appalling that, of the hundreds and hundreds of corporations, not a single one has been charged. Would it not be better to put a lot more money into auditing and to have powers given to CRA so they can go after the big tax cheats?

[The Chair, Liberal, Wayne Easter]

Is it the intent of CRA to go after widows and students?

[Ted Gallivan]

No.

[The Chair, Liberal, Wayne Easter]

Okay.

We'll turn to Mr. Cumming, followed by Ms. Koutrakis, Mr. Cooper and Mr. Fragiskatos, and then we'll end.

Go ahead, Mr. Cumming.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

Thank you to the CRA officials for being here today.

In budget 2019, CRA will receive $50 million over four years to create these dedicated audit teams for real estate in high-risk regions such as B.C. and Ontario.

To date, what's been the return on this investment?

[Ted Gallivan]

Just before COVID, we had reported that we'd exceeded a billion dollars in gross reassessments. I think that's the direct economic impact. I think the real property community, some real estate agents and lawyers involved, have also got the message that it's a higher area of coverage. It's not always a positive that our ROI is going up, and we've exceeded a billion dollars. It's sometimes positive when you see people changing their behaviour, which is one thing we're after.

With some of these latest amounts, we were starting to go a little higher in the food chain, away from flips and individual real estate agents maybe to the broker or the developer level. I think as our work changed, we've also been trying to get up to the influencers, because we're trying to send a message that the CRA and the government will continue to put resources toward non-compliance in the real estate sector.

We have the analytics. We have excellent support from our provincial partners in sharing data, and we intend to stay in those sectors until we see a decline in our ROI, which is really what we want to see—people paying the tax they should up front.

[James Cumming, Conservative, Edmonton Centre, AB]

Along the same lines, a budget amount of $350 million over five years was provided in 2016 to improve your ability for audits and tax collection.

Can you give the committee the information that would indicate you've seen an improvement, and how great an improvement that's been since 2016?

[Ted Gallivan]

Overall, across a couple of budgets we were expecting to gross $5 billion in identified additional tax revenue non-compliance. As of March 31 this year, we should have been at $3 billion and we were at $4.4 billion, $1.4 billion ahead of where we projected to be in identifying non-compliance and sending out a bill.

The court system, on the other hand, is feeling the strain. The Tax Court of Canada reported a 70% increase in complex cases over a recent period. We're seeing that some of the fight around the CRA identifying non-compliance is now shifted to the Tax Court of Canada and the Federal Court of Appeal.

We're doing more to get our audits for litigation up front, to make sure our appeals function and colleagues in the Department of Justice have funds. I think there are real pressures now with colleagues in Justice, because we're more successful in identifying non-compliant people, but they're not just rolling over and paying us. In some ways this has become a legal fight around CRA access to information and then the tax bills.

In some ways that's a strategic win. We have a lot of cases in front of the court, where they need to be perhaps, but we're a long way from winning those legal fights and having the capacity to successfully defend those in Justice.

[James Cumming, Conservative, Edmonton Centre, AB]

I want to go to the climate action incentive payment. My colleague asked some questions regarding what's being paid out versus what is being brought in.

It's clear to me that we're collecting a tax and the assumption is that we're going to give it back to the people. It was cherry-picked...a family of four and very specific circumstances around that family. Are you able to say that every individual in Canada is ahead when you assess this tax, including whatever the increases in prices would be? A lot of the suppliers of goods and services have to build this into their pricing models.

[Geoff Trueman]

I'm happy to take that.

To clarify, there certainly was no cherry-picking. Those are the general rates that apply in the provinces to all individuals who qualify.

Is every person better off? It would depend on the rate of fuel usage in a family. Circumstances may change, but on average the design of those rates is intended to return to families more than they would pay for the fuel charge.

[James Cumming, Conservative, Edmonton Centre, AB]

Is it fully loaded, including all costs? I hear from a lot of business owners that because of the taxes imposed on them, they've had to increase prices and those prices of course are paid by the consumer.

[Geoff Trueman]

It's intended to return to families more than the cost of the fuel they consume. I'm not sure how many rounds of multipliers that would take into account, so that might be a question better directed to the Department of Finance.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

Ms. Koutrakis.

[Annie Koutrakis, Liberal, Vimy, QC]

Thank you, Mr. Chair.

It's nice to see everybody from CRA again this afternoon.

There are always calls to go after taxpayers who are evading taxes, and a lot of resources are rightly being put into this effort, as you stated in your opening remarks, Ms. Caron. On the other hand, what resources are you investing in educating or making it easier for many Canadians who are doing their best to pay their share of taxes, but who perhaps cannot afford to hire tax specialists and must navigate very complex tax rules and may face the risk of not following the rules? Is any program in place that would help the smaller taxpayer?

[Janique Caron]

We do have some outreach activities. We also have a community volunteer program across the country to help a number of low-income taxpayers complete their tax returns and get access to the benefits they are often owed. I wonder if Mr. Vermaeten can offer more information.

[Frank Vermaeten, Assistant Commissioner, Assessment, Benefit and Service Branch, Canada Revenue Agency]

Sure, I'd be happy to do that.

As Janique said, there's a range of programs. The community volunteer income tax program helps low-income Canadians. That program typically helps 800,000 to 900,000 low-income Canadians a year, so that's a very important program. We also do a lot of outreach in trying to educate taxpayers, not only about their obligations, but also about the benefits of filing, so they get the GST rebate, Canada child benefit and all those things.

We also have recently launched a program called “file my return”, which allows lower-income Canadians to file by telephone. As you pointed out, not everyone is going to be aware of all the tax rules nor are they going to be comfortable with all the technology so they can file via telephone.

We also work with the software companies to produce affordable tax programs. The market has provided a wide range of free tax programs, which have a lot of advice built into them and that we examine closely to make sure they're getting the right calculations.

Those are just some of the things we're doing, and I think it is helping a lot of Canadians file their taxes.

[Annie Koutrakis, Liberal, Vimy, QC]

That's great. I'm really happy to hear that.

Do I have time for one more question, Mr. Chair?

[The Chair, Liberal, Wayne Easter]

Yes.

[Annie Koutrakis, Liberal, Vimy, QC]

In the 2020-21 main estimates, the CRA is requesting funding of $74 million for capital expenditures and recoverable expenditures under vote 5, which is an increase from last year of $45 million or 63%. Can you provide details with specific examples on what this increase represents?

[Janique Caron]

These are the investments we do and the many systems we have in the agency to deliver the tax programs. One of those systems is the program benefit system. That is currently operating in an aged infrastructure, so we have a multi-year project to be able to upgrade the system and make it more nimble and more modern. We need to invest our own dollars into that benefit system, so it's the main increase.

We also have a number of systems that help support many of the compliance activities led by Mr. Gallivan, accessing tools and data from third parties, for example, to inform our risk analysis.