Finance Committee on June 16th, 2020

[Ted Gallivan]

It's Mr. Gallivan here, Mr. Chair.

Mr. Vermaeten has sent me an email saying that he got disconnected.

[The Chair, Liberal, Wayne Easter]

Yes, I don't see him. I'm looking for him.

Go ahead.

[Ted Gallivan]

I can return the favour and answer something in his space.

We had embarked on a “people first” initiative within the CRA to try to design our programs and business practices from the taxpayer perspective, including by talking to taxpayers. In the case of the CERB, we had no time to do that.

In the case of the wage subsidy, for example, we had actual citizens focus test the tools we were applying and we brought in stakeholder groups. It's something that we started before COVID, but it's certainly something that we'll continue after—bringing stakeholders and citizens into the design of the program to give us feedback before we implement.

[The Chair, Liberal, Wayne Easter]

Thank you.

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Chair, just quickly, before I wrap up, I want to say that it is public service appreciation week.

There are millions of Canadians who are better off for the work that you have done, folks. Thank you so much. They're the people I represent and they still have roofs over their heads, largely, and food on their tables, in no small part because of your work. I want to say thank you on this occasion. Thank you, thank you and thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Sean. We'll second that sentiment.

We have Mr. Lemire, followed by Mr. Julian.

Go ahead, Mr. Lemire.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

In the Library of Parliament's accompanying documents, one of the questions mentions that the 2016 budget provided $351.6 million over five years to the Canada Revenue Agency, or CRA, to improve its ability to collect outstanding tax debts, with the hope of recovering an additional $7.4 billion over that period. In the previous intervention, it was also mentioned that these budgets had been increased.

In the 2020-2021 main estimates, how much money does the CRA allocate annually to combat tax avoidance and tax evasion?

[Janique Caron]

I wonder if Ted wants to take that one.

[Ted Gallivan]

Thank you for the question, Mr. Lemire.

Half of our overall budget of $900 million is aimed at abusive tax planning by multinationals or wealthy citizens. This represents 50% of our overall budget, or about $450 million.

I can follow up to give you the exact number, but it's usually 50% of our effort, which is aimed at 1,200 multinationals and 10,000 affluent Canadians.

The other budget is $2 million for small and medium enterprises.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Since 2016 and over a five-year period, you estimate that you can recover an additional $7.4 billion.

How did you come up with this evaluation? Is this amount still up to date?

[Ted Gallivan]

I'll make a clarification.

You're talking about an amount related to collection, not assessment. In the current fight, we're assessing, and then there's the collection. For these analyses, we rely on the past. We look at what the marginal ratio of our results is. Because we have a risk-based approach, the marginal results go down. In planning, we assume that it will be the marginal result we see today, with a decline. That's the basis on which we produce the estimates. Just prior to COVID-19, our programs and estimates were generally meeting expectations. We were able to collect the expected amounts. We had the green light just before the COVID-19 pandemic started.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

You are certainly in a position to point to companies that are at fault that you find difficult to catch or to hold to account for repaying that money. In many cases, these companies have taken advantage of the Emergency Wage Subsidy, the Canadian Business Emergency Account or the very large business support funds that were put in place in the context of the COVID-19 pandemic.

Is that the case? In your opinion, should these companies have been denied access to the assistance programs put in place to support businesses during the COVID-19 crisis?

[Ted Gallivan]

That's an excellent question.

When it came to these emergency programs, the rules were pretty clear. With regard to the emergency wage subsidy, for example, we had to base our decisions on existing legislation. For people with a history of aggressive tax planning, we spent a lot of time making sure they were eligible for the program. However, it should be remembered that this is a program that is designed to help employees and the funds are intended to subsidize salaries. We therefore limited ourselves to scrutinizing these companies before making payments. We are talking about a ten-year period. It's really about supporting the employees at the end of the day.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

This is indeed part of the answer that the minister often gave us during question periods. Nevertheless, some countries, such as Denmark, have been bold in passing laws to better fight fraudsters.

Would you have liked to have benefited from additional legislation? Would it have had a concrete impact on your work?

Would you have been able to increase collections if the law had been tougher?

[Ted Gallivan]

I think there's work to be done on the legislation itself. There are a number of ways, outside of the assistance programs, to address this issue that we are all concerned about.

When we see cases, such as the Loblaws case, before the courts, or the Cameco case where, despite the audits and the efforts of the agency, the Tax Court of Canada or the Federal Court of Appeal say that tax planning is done in good faith under the current law, I think we have to invoke the need to close loopholes.

Outside of the crisis, we have other ways to achieve the goal we all aim for, such as closing the loopholes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Are you able to identify these escape mechanisms or the ways in which companies are doing it today? We are all familiar with tax havens, like Barbados, for example, but what are the modern ways of doing things?

Is there anything in the digital economy that you're particularly concerned about that could be changed?

[Ted Gallivan]

There's a lot packed into that question.

Before turning to the digital issue, I will limit myself to the issues that concern us at the agency. In terms of our protocol regime, which includes protocols with Barbados and Luxembourg, those arrangements were made at a certain point in time, and I think we have a good track record in the courts that gives some food for thought.

As far as multinationals are concerned, when we started to have country reports under a program of the Organisation for Economic Co-operation and Development, or OECD, we found that Luxembourg, for example, appeared in a disturbing number of documents. We were aware of that, but when we saw the percentage of Canadian companies that had trusts in Luxembourg, it gave us pause for thought. This is an example of a debate we could have to determine whether it is time to review our protocols with Luxembourg.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

My speaking time is up, but I will take the time to thank you for your work. I think it's essential work if the Treasury is to receive the revenue that should be remitted to it.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you to all.

Internet in the country is sometimes so much fun I get kicked off.

Peter Julian, the floor is yours.

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

Thank you very much, Mr. Chair.

Thank you, witnesses, and thank you for your service to our country. In the public service we have remarkable individuals, and I appreciate that.

I'll start off with a comment, following up on Mr. Fraser's questions. We already know that fraud is covered in the Criminal Code. We already know that the police can prosecute. If you do a Google search, you can find several cases of fraud that are being followed up on right now and in prosecution. I'll just put aside the idea that there needs to be some draconian enhancements to force people who have gotten the emergency benefit...to penalize them, put them in jail or fine them. The Criminal Code already covers that.

I think that comment is important. I don't like this dialogue about somehow penalizing people who are in desperate straits and putting them in jail. In cases of systemic fraud, they already can be prosecuted. That is the solution, and that is why we certainly won't support any draconian provisions in any omnibus legislation going forward.

My questions are around the auditor provisions. The amount of $27 million is for, I believe, enhanced auditing through CRA. Could you tell me how many auditing positions that would represent?

[The Chair, Liberal, Wayne Easter]

Okay, who wants to take that question? CRA officials also have the right, Peter, to comment on your comment if they so decide.

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

It's a free country.

[The Chair, Liberal, Wayne Easter]

Go ahead, Mr. Gallivan.

[Ted Gallivan]

Thank you, Mr. Chair.

I will answer your second question first, and I will accept your invitation, thank you. There are 270 auditors roughly, and our ramp-up was definitely in the space of multinationals and high-net-worth individuals, but we also leaned into the real property sector, which is a very complex issue. CRA doesn't necessarily want to take ownership for the escalating home ownership costs in Toronto and lower mainland Vancouver. There is some work there, but also organized crime is trying to use the sales tax regime. Roughly 270 FTEs spread across all of our programs are focused on aggressive non-compliance.

I think to the point about law enforcement, for the information of the committee, the point is valid. Law enforcement does have the ability to pursue these cases, and we have seen in many communities local law enforcement taking up CERB fraud.

In our experience, the challenge is that there often has to be a nexus, a nexus with more violent crime and with distribution of drugs, so local law enforcement has to make prioritization decisions, and they often prioritize more violent crimes or crimes that have a broader impact on the community, as is their right, and that would explain this difference of opinion in terms of owning CRA powers or not. I will stop so that there can be a follow-up.

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

Thank you very much.

I just want to go to the issue of prosecution of fraud, tax fraud and tax avoidance. The Parliamentary Budget Officer last year told us it's $25 billion that the federal government loses every year. That was the conservative estimate they made at the time.

I am sitting here in New Westminster, B.C., and right next to me is the international consortium of investigative journalists and their offshore leaks database. I just want to ask about that, because it's very detailed. It has a whole list of Canadian corporations.

I want to start with the Panama papers. How many of the corporations named in the Panama papers on the offshore tax leaks database have been charged by CRA?