Finance Committee on June 22nd, 2021

[The Chair, Liberal, Wayne Easter]

I will have to go Mr. Julian, Minister.

It's the last question, Peter.

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

You have not laid any charges or got any convictions.

There are absolutely no prosecutions, no convictions. We have seen it in so many cases. We have these victims like Janet Watson who have lost their life savings in the Cinar fraud, the Mount Real fraud or the Northshield fraud.

The government and you as minister have both the Income Tax Act and the Inquiries Act. You have two tools to call a public inquiry into this, to get to the bottom of it and to get justice for the victims.

Why do you consistently refuse to use the tools that you have to put in place a public inquiry so that the victims can get justice?

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

Mr. Chair, my colleague said that no investigation has been carried out, which is totally false. If he had listened to what Mr. Gallivan said, he would know that there are cases before the court as we speak. We have not yet achieved the anticipated results. It is not up to me to tell lawyers and the court whether they should proceed with a charge or not, because that is a completely independent process in which I do not intervene. What my colleague said is not true, and I urge him not to misinform the public.

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

And yet those are the facts.

[The Chair, Liberal, Wayne Easter]

We will have a lineup. I will go to Mr. Lawrence, and I want to leave room for Mr. Fast to ask a question on the end of that round. Then I will go to Ms. Koutrakis.

On this inquiry business, I have to ask this question. It's either to the minister or Mr. Gallivan. Do you have the tools to call a public inquiry under section 231.4 of the act? Are the tools there for you to call what we would consider a public inquiry?

[Ted Gallivan]

Thank you, Mr. Chair.

Having recently used that tool once in 30 years, I note that it was not a public inquiry and I don't believe the intent was for that tool to be used for a public inquiry.

I would be happy to get a more detailed answer to you off-line, but, again, our single use of it was absolutely not a public inquiry. The intent of it was to compel the taxpayer under audit to give information to the CRA, as opposed to making it public.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Lawrence, there are about four minutes for you, and one for Mr. Fast.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair.

I would like to continue asking the minister questions.

In October 2016, Canadian taxpayers had to report the sale of their principal residence for the first time. Since then, taxpayers have had to designate their principal residence in their tax returns. Why? What is the purpose of these reports?

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

Mr. Chair, my colleague's question is really an administrative one, so I am going to ask Mr. Gallivan to answer it.

[Ted Gallivan]

Mr. Chair, at the CRA, we have made the real estate sector a priority in terms of the underground economy.

When we got access to this new tool, we used the information to identify non-residents, and particularly those who, for example, were trying to avoid capital gains tax on the sale of their house. As non-residents, they are not entitled to do that. Citizens who own two or three houses were also trying to benefit too generously from the capital gains exemption.

So this is an administrative measure that we use in a sector where there has already been rule-breaking.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

With respect, I'd like this next question answered by the minister, if I could, as her ministry is largely an administrative ministry.

Could that information collected in the principal residence exemption be used to impose a future tax on home equity? Is that possible?

[The Chair, Liberal, Wayne Easter]

Do you want to put that one again, Philip?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes, no problem. Thanks, Wayne. I'm sorry that I wasn't clear.

Currently, you have to declare the sale of a principal residence. Could the information collected by CRA be used in the future to help collect a home equity tax?

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

Mr. Chair, the questions my colleague is asking me are administrative questions. I can't answer administrative questions, because that is not my role as Minister of National Revenue.

I will yield the floor to Mr. Gallivan.

[Ted Gallivan]

If you were asking me theoretically, I'd say we could impose the burden on the sale. If I were to imagine a regime—not that I've been asked to, and not that there are any government plans or policy debates about this—right now, I would say we would probably want the lawyers who are involved to be responsible for administering the tax. We probably wouldn't rely on information from the taxpayer. We'd probably feel better with a regime that was driven by something new, which would be the lawyers doing it. I'm not sure this existing database would be of any use, even if that were to ever happen.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

As William Shakespeare once wrote, me doth think you protest too much. It reminds me, with all respect, Mr. Gallivan, of my seven-year-old, when he's caught doing something and he feels guilty and immediately says, “I didn't do anything. I never did anything”. However, I do appreciate your service and respect you for that.

Getting back to the tax evasion issue, there are literally billions of dollars we're not getting from tax evaders. It's not just that I am saying that, or Mr. Julian is or Mr. Ste-Marie is. That's just fact. However, the government spent its first couple of years trying to collect from main street, from small business owners, an amount that was much lower.

Could you confirm for me, first, the amount of money we're losing because of tax evaders, and then, second, the money we got by harassing innocent hard-working small business owners from Canada's main streets?

[Ted Gallivan]

The first number I gave previously is the one I focus on, which is roughly a $6-billion tax gap for multinational enterprises. That involves a small group in Canada, and we have the resources to audit and litigate with them. The second number, the $800 million to $3 billion, involves a population that is a little bit more difficult to define, high-net-worth individuals.

As I said, we agree that there are still billions more to get, but whether we're getting half or two-thirds of it, we feel we are making progress. We also feel that by taking the challenge to the courts, a strong message of deterrence is being sent, and also it sets up the finance department to close the loopholes.

In terms of main street, under the audit function that I lead, which involves roughly 11,000 of the CRA's employees, we do very few audits of people who earn less than $100K. Our audits are increasingly risk-based. The average audit conducted by my shop involves $170,000 in discrepancies identified or gross tax. That's twice as much as it was in the past.

I would say, given the data and analytics, that more and more of our results come from high-net-worth individuals and multinationals. Roughly 2,000 multinationals and 16,000 high-net-work individuals make up 60% of the audit billings we give a year. The two million other businesses and the 26 million other Canadians represent the other 40%.

I think we're increasingly focused on the upper end. That is really where I think, from a fairness perspective and a deterrence perspective, we're trying to stay, but as noted the results are slow because these people have pushed back through the courts. That's why we have, for instance, cases before the Supreme Court. That's why we have so many cases in the Federal Court of Appeal. I have one file in which the taxpayer has 53 pieces of litigation related to the audit. We haven't even finished the audit, and there are 53 distinct pieces of litigation they've thrown at us to throw sand in the gears.

I would describe a situation in which I think we're with this committee in being focused on the sophisticated actors. There's obviously a difference of opinion on the pace of progress, but we're definitely not focused on main street and we are increasingly using data to be more selective when we have to.

[The Chair, Liberal, Wayne Easter]

Okay, I've allowed a long answer there.

Mr. Fast, you can have one question, and we'll go to Ms. Koutrakis to close it off. We're over the minister's time by a bit.

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Yes, I want to ask the minister about a couple of programs that are tools in her tool kit for tracking down those who are evading and avoiding taxes.

There's the offshore tax informant program. Minister, are you familiar with that program?

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

Yes, I am familiar with that program.

[Ed Fast, Conservative, Abbotsford, BC]

How successful has it been?

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

Mr. Gallivan could answer you better.

[Ed Fast, Conservative, Abbotsford, BC]

Go ahead quickly, Mr. Gallivan.

How successful has that been?

[Ted Gallivan]

We're approaching $100 million in identified, unpaid taxes, plus, when we find those cases, we mine them for others. In terms of ROI and the tactical benefits, it's tens of millions of dollars, cresting $100 million. In terms of deterrence, it's harder to track, but it's definitely there.

[Ed Fast, Conservative, Abbotsford, BC]

What about the mandatory reporting of international EFTs?

That's for Mr. Gallivan.