Thank you, Mr. Chair.
Happy Valentine's Day, everyone, although what I have to talk about, tax avoidance and the general anti-avoidance rule, have very little to do with love and romance.
At the outset I would like to emphasize that I am appearing here on my own behalf. I have no special interest that I represent, and as a result I'd like to share with you a little bit about my background and experience with respect to tax.
I taught at a Canadian law school for 28 years. Since that time I have taught at various law schools around the world, including Harvard Law School and New York University School of Law. I have practised on a part-time basis for 35 years with two major Toronto law firms. I was a consultant to the Department of Finance on the drafting and design of the general anti-avoidance rule back in 1986-87. I've been a consultant to the OECD, the United Nations and a number of governments with respect to tax avoidance.
I'm sure I don't have to tell the members of this committee that tax avoidance is a serious problem for our tax system. It deprives the government of much-needed revenue. It exacerbates inequality, because only corporations and the wealthy are able to take advantage of tax avoidance. As a result, others must pay more. It also imposes huge costs on the tax system—costs for the CRA, the Department of Finance and for the courts. Finally, it undermines public confidence in the tax system generally.
The general anti-avoidance rule plays a critical role in preventing and controlling abusive tax avoidance. It's a relatively simple rule. It basically says that tax benefits from transactions that have as their principal purpose tax avoidance can be denied if those transactions misuse or abuse provisions of the Income Tax Act. The purpose of that rule is to deter abusive tax avoidance. However, the GAAR is over 30 years old and is showing its age, so its effectiveness in controlling tax avoidance has been diminished. It needs a significant overhaul.
The government, the Department of Finance, announced a public consultation on the GAAR in its November fall economic statement of 2020. It's now fourteen and a half months later, and we still don't have that GAAR consultation launched. I don't understand that. Further, I don't understand why a public consultation is necessary with respect to the GAAR. The general anti-avoidance rule's flaws are well known to those in the tax community, and in my view, the Department of Finance should simply get on with it.
I'd make two recommendations in general to this committee. The first one is it recommend to the government that the Department of Finance cancel its GAAR consultation and simply move to amend the GAAR to make it more effective. As I say, those flaws are well known, and I would be happy to provide the committee with a list of the flaws.
If the Department of Finance insists on going ahead with its consultation, then I would suggest the committee recommend that it do so immediately.
Thank you.