Evidence of meeting #40 for Finance in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was kpmg.
A video is available from Parliament.
5:20 p.m.
Conservative
5:20 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Thank you. I have one quick question of Senator Downe.
You mentioned that the PBO can't get CRA's co-operation to do a full tax gap analysis. Is it a matter of resources? Is it a matter of training? What's the problem here? Do they not have the skill sets to be able to do them?
5:20 p.m.
Percy E. Downe
If you ask the PBO, and I'm sure you'll have him as a witness, he'll tell you it's a lack of co-operation. The PBO has sent out detailed plans with information they require, and again, it's not personal information; it's the collective information. They ended up getting a legal opinion advising CRA that they had the authority to do this, and the CRA has refused to budge, and nobody has intervened.
5:20 p.m.
President, Professional Institute of the Public Service of Canada
Our members have not been asked to do this work.
5:20 p.m.
Liberal
The Chair Liberal Wayne Easter
I was going to ask you, Ms. Daviau, if you wanted in.
Go ahead, Ed. Sorry.
5:20 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Again, Senator Downe, is this a matter of political unwillingness to do this?
5:20 p.m.
Percy E. Downe
That's a good question. I don't know. What the CRA has ended up doing is they've done six individual tax gaps, and even they have shown that between $20 billion and $24 billion is missing that they're failing to collect.
I can understand why they don't want to do an overall tax gap, but given the record of misleading information of the CRA—and I have a long list of examples of those—it's best if an outside group does it. In this case, the PBO is the group to do one. I think this is the third PBO who has been trying to get the information.
5:20 p.m.
Conservative
Ed Fast Conservative Abbotsford, BC
Mr. Campbell, you mentioned that there is $25 billion that could be available if the proper tools were in place. You mentioned two specifically: formulary application of profits and unitary treatment to address transfer pricing.
Could you just quickly comment on those two?
5:20 p.m.
Economist, Technical advisor, Professional Institute of the Public Service of Canada
On formulary allocation of profits, what you're basically doing is choosing different criteria to ascertain what amount is going to be taxed. This is already done in Canada to determine which province a company should be taxed in. I think the criteria used are payroll and sales, so you look for that economic substance and then tax accordingly.
Unitary treatment of multinational corporations is so that there can't be this shifting of profits within their own supply chains in a way that's meant solely to be advantageous for tax treatment, as opposed to accurately reflecting where the commerce takes place. It allows it to be taxed in the appropriate country so that it goes into the—
5:25 p.m.
President, Professional Institute of the Public Service of Canada
[Inaudible—Editor]
5:25 p.m.
President, Professional Institute of the Public Service of Canada
Sorry, Ryan; that was my outside voice.
5:25 p.m.
Economist, Technical advisor, Professional Institute of the Public Service of Canada
No; if you want to, go ahead.
There was one last aspect to the combination of policy prescriptions that would help reduce profit shifting and transfer pricing, and that would be—it's been used in other countries or is starting to be implemented in other countries—the idea of a global minimum tax for corporations. It is international co-operation to make sure that corporations are taxed fairly everywhere and that they're not skirting responsibilities everywhere.
5:25 p.m.
Liberal
The Chair Liberal Wayne Easter
We're way over where I wanted to be, Ms. Daviau, but go ahead, very quickly.
May 6th, 2021 / 5:25 p.m.
President, Professional Institute of the Public Service of Canada
Very quickly, just in plain language, what this means is that you have basically a shell company set up in a country where the tax laws are advantageous. Nobody even works there. Sometimes there's not even a physical workspace, but that is the country in which the profits are being taxed, as opposed to where they're being made, such as here in Canada. Sometimes our resources are being taken for these profits that we don't even get taxes on.
5:25 p.m.
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you, Mr. Chair.
I sent a note to our colleague Ms. May indicating I'd be willing to cede my time. I don't want to see her get cut off with the bump you save at the very end, so I'm happy to pass it over.
Should Mr. Campbell or Ms. Daviau have the opportunity to advise on what steps we can do to support efforts towards a global minimum corporate tax, I'd be interested in your advice, but I'll cede the floor.
5:25 p.m.
Liberal
5:25 p.m.
Green
Elizabeth May Green Saanich—Gulf Islands, BC
Thank you. I would love to give Sean back some time. I will try to be really brief.
I've been troubled for decades by consistent reports from the Auditor General's Office that CRA does not take seriously their efforts to go after fat cats with complicated structures and lots of lawyers as much as they do in going after little guys like my friends or in auditing my daughter as a university student. You have to wonder.
As experts in how CRA operates, going first to PIPSC—either Ryan or Debi—and then to Senator Downe if there's time, is there a cultural problem within CRA that's deep and systemic, which both through resources and culture would make them go after Canadians with limited means rather than pursue complicated files on well-heeled tax evaders?
5:25 p.m.
President, Professional Institute of the Public Service of Canada
I personally don't think so. I think it's a question of not having enough resources, not enough supports, not the right organizational structure in place to maximize their ability to go after international tax cheats.
Maybe Ryan has something to add.
5:25 p.m.
Economist, Technical advisor, Professional Institute of the Public Service of Canada
My interactions with auditors, which are numerous, suggest that they're driven by a deep sense of fairness and that what they want is a tax system that's defined by integrity and fairness. Nothing would make them happier than having rules and resources that would allow them to go after the “big contact” cheats, the ones who are trying the hardest to avoid taxes.
5:25 p.m.
Percy E. Downe
Sure.
It's the senior management of the CRA, and I have a long list that I can send the committee, if you're interested.
Let me give you one example of the problem at CRA. They announced in 2017 that 90% of calls to the agency were successfully connected to an agent or an automatic help line. The Auditor General investigated that claim and found out that they blocked 29 million of them. That meant that the overall success was 36%. Now, what agency of government thinks it's acceptable to claim 90%, when they block 29 million of the calls and then don't include them?
There's a long list of the ways in which they conduct themselves. I have not seen anywhere else in my experience in provincial or federal government that an agency or a department of government operates this way.