Evidence of meeting #10 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rules.
A recording is available from Parliament.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you.
Other countries come to us for advice. What is some of the advice we might offer them?
Director General, Criminal Investigations Directorate, Compliance Programs Branch, Canada Revenue Agency
Canada often goes abroad to teach. The OECD has put in place some schools in order to teach investigators in other countries about tax evasion. We often go, for example, to Italy, where some of our teachers help developing countries. The feedback we get is always tremendous. People learn a lot. They progress and become better investigators.
I would say that, internationally, the feedback we've been getting is very good.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Would you say that Canadians can have confidence in the current systems that are in place?
Director General, Criminal Investigations Directorate, Compliance Programs Branch, Canada Revenue Agency
I would say that, yes, we are doing well in Canada, and we're continuing to progress.
For example, by putting the J5 together only a few years ago, we have been able to do a lot more. We work with our FINTRAC colleagues here, along with the J5. We put in place, only a few years ago, what we call “the challenge”. We put our best and brightest people in charge of crypto investigations and other very complex investigations done in the cyber realm. We bring together FINTRAC, colleagues in the J5 and the RCMP. We put all these people from the five countries together to try to figure out what's going on and find leads to investigate.
Those are the types of things that make us special in terms of a group that's able to work collaboratively like that—having all these sophisticated people around the table coming up with the right leads to investigate, and also investigating them together sometimes.
Liberal
Jake Sawatzky Liberal New Westminster—Burnaby—Maillardville, BC
Thank you.
You mentioned cryptocurrency. Could you elaborate on the evolving landscape here and on any kinds of new challenges that have arisen with cryptocurrency?
Director General, Criminal Investigations Directorate, Compliance Programs Branch, Canada Revenue Agency
Cryptocurrency is evolving very quickly, along with all the other technology that surrounds it, such as blockchain and the devices used to do those transactions. For example, these days, you can see a lot of transactions being done on a cell phone. Often, this will be encrypted on very sophisticated devices that are difficult for all law enforcement, not just the CRA. They can have a hard time cracking those devices in order to get access to the information inside. Obviously, we do this with warrants issued by the courts, but it can remain difficult, given how the technology is progressing.
We have the best tools, but the technology is progressing so quickly that it can be difficult to investigate sometimes.
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Sawatzky.
Thank you, Mr. Ferron.
Mr. Simard, we now go to you for two and a half minutes.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Madam Chair.
I don't mean to target you, Mr. McGowan, so forgive me for directing my questions to you again.
From my limited knowledge of taxation, I gather that the CRA’s goal is to make sure the government gets its due by enforcing tax rates. Earlier, you explained the difference between tax avoidance and tax evasion. I don’t want to get into an ethical debate, but as I understand it, the reason for introducing a policy or regulation is to achieve a desired outcome. We were discussing the tax exemption for income from countries with loose tax systems, and you said that one of the objectives of section 5907 of the income tax regulations was to help multinationals compete on a level playing field in those jurisdictions. However, doesn’t that have the adverse effect of encouraging more and more multinationals to use the regulation in order to evade paying taxes? Is that something you adjust for or measure?
Associate Assistant Deputy Minister, Tax Legislation, Department of Finance
Thank you for the follow-up question.
Building upon what I noted earlier, the basic idea behind the exempt surplus system—which allows Canadian companies that have subsidiaries in a foreign jurisdiction with which we have a treaty to repatriate earnings tax-free—is largely competition.
As a simple example, if a Canadian company wants to expand into the United States—as is the most common situation, I think—it can set up a subsidiary in the United States. That subsidiary can earn active business income from competing with American companies and pay the same taxes as its competitors, which puts it on a level playing field. When those amounts are returned, those can be tax-free.
It's similar to what you see in a lot of other jurisdictions, including very recently the United States, which moved to a similar territorial system.
First, the—
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. McGowan. That's the time for this round. Thank you very much.
Two and a half minutes goes by pretty quickly.
Mr. Lefebvre, you may go ahead for five minutes.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Thank you, Madam Chair.
Thank you to all the officials for being here.
Would you agree, Ms. MacLean, that not everyone has access to tax havens? Canadians get up every day and go to work. They collect their paycheques, they pay their share of provincial and federal taxes, they fill up their gas tanks and they pay gas taxes. It’s not true to say that there isn’t a tax on groceries, because farmers pay fuel taxes, and that cost is passed right on to consumers in the prices they pay for groceries. Ordinary Canadians are paying those taxes on everything.
Do you agree with me that the wealthy are the ones who benefit from tax havens?
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
I would say it's getting more and more difficult for the rich to use the types of structures you're referring to. We have better tools to address them. We have better information exchange, which perhaps my colleague Adrianna could address in a few minutes. We have a more comprehensive regime, and we have good audit resources.
Challenges exist, and I think it's true that there are barriers to entry, if you will, to attempting that type of structure, but there's much more risk in undertaking that type of structure today than there was decades ago, so I'm optimistic about the agency's ability to attack the types of structures you refer to and ensure that the appropriate amount of tax is paid in Canada.
The common—
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Sorry to cut you off, but I have only five minutes.
Can you tell me how many people at the CRA are assigned to small businesses?
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
I don't have those figures available this afternoon.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Do you agree with me that the number of CRA staff assigned to small businesses is probably greater than the number assigned to big companies?
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
No, I don't think I could agree with that, because we do audit in relation to risk, and we certainly have higher coverage levels for larger businesses, more complex structures and riskier businesses than we do for small and medium-sized enterprises.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Thank you very much.
Now I’d like to talk about the offshore tax informant program. How many staff work on that program?
Director General, Compliance Programs Branch, Canada Revenue Agency
If the question is how many public servants are working for the offshore tax informant program itself, it would be somewhere in the neighbourhood of 10, but we leverage the audit resources in the various audit programs so there's some program oversight, and then we use our audit resources and deploy them to carry out the audits.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
As we speak, how much has been paid out to informants under the program in the form of rewards? What's the amount or percentage?
Director General, Compliance Programs Branch, Canada Revenue Agency
What I can tell you is that to date, since the inception of the program, we've assessed approximately $500 million in federal tax and penalties. That's over the course of the whole program, going back to 2014.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
The program has a rewards component, so how much have informants received?
Director General, Compliance Programs Branch, Canada Revenue Agency
I apologize.
In terms of the reward payment, the reward itself varies between 5% and 15% of the amounts collected. We don't publish or publicize the amounts that have been paid to those who have made submissions to the program, whom we call informants, but we do have a percentage. It's available on our website. We have a set of criteria for what makes an informant eligible, as well as a set of criteria that outline the varying percentages of the associated rewards.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
Do you think raising the reward percentage would lead to more tips from informants? Do you think that would have a positive financial impact?
Director General, Compliance Programs Branch, Canada Revenue Agency
It's an interesting question.
I would say that the program is very successful. It was one of the pieces of work that we put in place that have really helped in terms of bringing in data and information related to international and offshore transactions. These are important transactions and important pieces of information that are being ingested into our audit program.
In terms of whether or not the percentage would change the number of submissions, I wouldn't be qualified to comment on that today, but I can say that we've had over 1,000 submissions since the inception of the program, which is quite impressive.
Conservative
Éric Lefebvre Conservative Richmond—Arthabaska, QC
All right. Thank you for your answers. I'll follow up on this later.