Finance Committee on June 22nd, 2021

[Ted Falk, Conservative, Provencher, MB]

Okay.

It says overseas. You should know better than I do.

Regardless, budget 2021 proposes to provide additional funding to the CRA to improve its ability to collect outstanding taxes, yet the budget document admits the investment will only lead to the collection of about $5 billion over the course of five years. That's a mere $1 billion per year compared with an annual $25 billion lost.

Minister, to me, recouping $1 billion for $25 billion lost is a failing grade. Your government is raising taxes on Canadians while failing to go after the taxes that are already owed. Why is that?

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

Mr. Chair, I would like to remind my colleague that when we came to power, we raised taxes for the richest people, but lowered them for the middle class. From the beginning, we were here to help, through the Canada child benefit and the guaranteed income supplement. We instituted measures to help Canadians before the pandemic and during the pandemic, and we are going to be here to help after the pandemic.

I can understand that tax evasion represents money lost, for my Conservative colleague, since it was never a priority for the Conservative government and fighting tax evasion is still not a priority for the Conservatives today.

[Ted Falk, Conservative, Provencher, MB]

That comment just isn't accurate, Minister. In fact, CRA has launched fewer and fewer audits of large corporations over the last several years. It's actually a 30% drop during your tenure as minister, and of some 30,000 audits of large companies conducted since 2015, less than 20 of them were sent to the CRA's criminal investigation division. Half of those investigations have been abandoned, and a mere one case as been referred to prosecutors.

Is that really the best that this government can do?

[The Chair, Liberal, Wayne Easter]

Minister, that's the last question.

Go ahead.

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

Mr. Chair, in 2013‑14, the CRA did only 43 audits in connection with international tax evasion. For 2019‑20, 1,100 audits were done. My colleague said we are doing fewer audits. That is false.

[Ted Falk, Conservative, Provencher, MB]

Mr. Chair, I actually have a couple more questions.

[The Chair, Liberal, Wayne Easter]

You may have. If we have time later, you'll get to them.

Mr. Sorbara, the floor is yours for a five-minute round, followed by Mr. Ste-Marie for two minutes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Chair.

Welcome, Minister. It's a pleasure to have you here today and to see you.

This topic is obviously a very important topic. Mr. Chair, as you know, in our first session of Parliament—I believe Mr. Kelly was with us a well—we put together a report called “Confronting Money Laundering and Terrorist Financing: Moving Canada Forward”, a beautiful report, 90 pages, that we got to do. That was a good introduction in terms of tax evasion, money laundering and so forth. Our government has done a lot. We did a lot as a finance committee a few years ago. It's great to see also, with base erosion and profit shifting, the resources that the government has put into CRA to be able to undertake this aspect.

Mr. Gallivan, I have a question for you. You were able to briefly touch upon the Income Tax Act and any sort of idea of a public inquiry. Could you expand on those comments that you briefly commented on earlier, please?

[Ted Gallivan]

That's back to the question about the power of inquiry under the Income Tax Act. I think that inquiry is not to be confused with the traditional public inquiry as you might understand it. That power under the act has rarely been used. We've used it once in the last 30 years. Really it's to compel testimony from witnesses who are not otherwise co-operating, so it basically involves contacting the chief justice of the Tax Court of Canada and obtaining a judge who will then question one specific witness. It's seen as advancing a taxpayer's specific file, and it's kind of more operational than I think the committee would like.

There are also over 3,000 pieces of tax litigation involving complex tax matters before the court today. All of those public records are accessible. I would suggest that there is a fairly detailed track record of the agency's activities and the kind of tax planning we're attacking already on the public record that people could make reference to.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Gallivan.

Minister, you've been the minister for the Canada Revenue Agency for a number of years. You have submitted a number of budget requests to the government, and in terms of asking for resources to be provided to the Canada Revenue Agency.

Can you again really touch upon just how much we have invested into CRA because of what you have requested as the minister of the Canada Revenue Agency?

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

I thank my colleague, who is also my parliamentary secretary, for his question.

Our government has invested over $1 billion in the Canada Revenue Agency. It actually had to organize an entire sector of the CRA so that, as I said, it could provide the resources and tools needed to be able to combat tax evasion. We had lost expertise. We have sought out people, we have signed agreements, country by country, and we are working with the OECD, the Organization for Economic Cooperation and Development. The CRA works at the international level. That is why it is so important to support the 2020‑21 budget. We are giving ourselves additional tools to ensure that the rules and the laws that enable us to take more effective action against tax evasion are tightened.

[The Chair, Liberal, Wayne Easter]

It's your last question, Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I'll go back to Mr. Gallivan.

Mr. Gallivan, as you know, at the Canada Revenue Agency, the government has invested significant resources. Can you speak about this in terms of the ongoing breadth of proceedings that the CRA has undertaken, in terms of looking at aggressive tax planning and also, of course, on the tax evasion side, please?

[Ted Gallivan]

Thank you.

I'll frame it in terms of the question about the additional billion dollars a year not making a dent, because I think it's true that the billion dollars a year is a tactical outcome. It's about the type of files that we're taking forward and the jurisprudence we're creating. That's what really has the strategic value. It's true that with an objective to find $5 billion over six years, we're already at $5.3 billion, but that's very operational.

I would again talk about the four cases at the Supreme Court, the many cases at the Federal Court of Appeal and the thousands of cases at the Tax Court, which is kind of trying to redraw the line of what acceptable tax planning is in this country. It's the reason why budget 2021 is now focused on additional lawyers and litigators for the Department of Justice.

Strategically, I think you see increased pressure on a sophisticated tax planning industry, and I think you see increased activism by the Department of Finance to close the loopholes that were surfacing, so in that way, the fight is really, I think, now before the courts, and in terms of the legislation as opposed to the audit floor.

[The Chair, Liberal, Wayne Easter]

Thank you. Thank you, all.

We are soon going to run out of time, but Mr. Ste-Marie and Mr. Julian have two and a half minutes each. Mr. Lawrence has five, and then Ms. Koutrakis, if you have a question or anyone else on the government side has a question, we'll go there.

Mr. Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

If we want to get to the bottom of the tale of the shell companies set up by KPMG, if we want to get to the bottom of the tale of the thousands of small investors like Ms. Watson who were swindled, the only solution, according to the experts, is a public inquiry. Tax law expert André Lareau is one of the people saying that.

The role of requesting an inquiry has been assigned to you, Minister, and no one else. I also want to remind you that it was thanks to a whistle-blower inside the CRA that we got wind of the deals that were offered to the Isle of Man fraudsters. The reason the CRA's investigators are unhappy is that the order came from higher up. It takes a public inquiry.

Are you going to call a public inquiry, as you are given the authority to do by section 231.4 of the Income Tax Act, yes or no?

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

I thank my colleague for his question.

As I said, I can understand very well. I have enormous sympathy for the people who have been victims of fraud. I know how much this must affect them.

Out of respect for the obvious principles of judicial independence, I believe that politicians should never interfere in investigations.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

It isn't interference.

Minister, you are the only person in Canada with the power to shed light on it and get to the bottom of things. That is the power you have. You are the minister. Sympathy is not enough.

Are you going to initiate a public inquiry?

I understand it's a no. The message you are sending to everyone who has been swindled is that you are sympathetic, but you aren't going to do anything. That is unacceptable. That choice is the choice to do nothing to get it moving, to do nothing to get to the bottom of things. That is a definite sign of incompetence.

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

I can understand my colleague's frustrations. For our part, we govern. We establish priorities.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

And yet you are not governing.

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

That is what my colleague will never be able to do. I have told him repeatedly that the Canada Revenue Agency is independent. I cannot initiate an investigation—

[Gabriel Ste-Marie, Bloc, Joliette, QC]

You are the only person who can request a public inquiry. It would seem that you do not even know this. That is unacceptable.

[The Chair, Liberal, Wayne Easter]

Mr. Ste-Marie, the minister has the floor. I don't want to intervene here, but I would suggest that members go back and look at Mr. Gallivan's answer on section 231.4, in which he talked about what kind of inquiry that is under the act. I'd suggest members look at that comment. Look at section 231.4 in relation to the words Mr. Gallivan said earlier.

Mr. Julian.

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

Thanks, Mr. Chair.

I want to get back to the revelations this morning about wealthy Canadians, the ultra-rich with fortunes of tens of millions of dollars. Over the course of the past six years under your mandate, Madam Minister, there has not been a single charge laid around income tax evasion.

Why have the ultra-rich in this country been treated under your ministry with kid gloves?

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

Mr. Chair, it is completely false to say that the ultra-rich have been treated with kid gloves. At least, that is not how I will treat them, because I have absolutely no respect for the people who defraud the tax system.

I don't know what my colleague is trying to do, but if he thinks we are going to solve everything, I think he is naive, because this is a global problem. As I said a little earlier, the ultra-rich pay ultra-lawyers and ultra-tax experts and do everything in their power not to pay their fair share.

That is why it is so important for our government to give the CRA the resources and tools needed to carry out investigations, which are ongoing at present. We have not yet achieved the anticipated results, but I can tell you that the CRA has done its job. I congratulate it.