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.
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
You make the referral. Okay.
I think I have only about a minute left.
Two years ago, the then finance minister sent a letter to this committee about the need to update our terrorist-financing and money-laundering legislation. I'll put this question to FINTRAC. What do we need to do to update this act, and why has it not happened?
Annette Ryan Deputy Director, Partnership, Policy and Analysis, Financial Transactions and Reports Analysis Centre of Canada
I think there have been a number of legislative changes in recent years, and currently, Bill C-12 contains measures that would further strengthen the regime.
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
We need a statutory review that would go beyond what's in Bill C-12. Is that fair?
Deputy Director, Partnership, Policy and Analysis, Financial Transactions and Reports Analysis Centre of Canada
That's correct.
Liberal
The Chair Liberal Karina Gould
Thank you very much, Mr. Kelly.
We'll turn now to Mr. Turnbull for five minutes.
Liberal
Ryan Turnbull Liberal Whitby, ON
Thanks to all the witnesses for being here today. Mr. Lemieux, I think you said in your opening remarks that there were critical legislative changes and policy reforms that have aided your ability to track down and crack down on tax evasion and offshore tax havens.
Can you speak to what the main ones were? I know you mentioned the new mandatory disclosure rules as being one, but were there several others? I have some in my notes here, and I'm wondering whether you can speak to them.
Assistant Commissioner, Compliance Programs Branch, Canada Revenue Agency
There is the common reporting standard that we have, and I think I've already mentioned that over 100 jurisdictions have implemented it and are sharing information with us.
There are also some enhancements that have been done to other tools that we have, but I will turn to Ms. MacLean to go into more detail.
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
Thank you.
I would like to highlight the introduction of the excessive interest and financing expenses limitation, or EIFEL, rules. They will generally restrict large corporations to deducting 30% of their profits as interest payments. Historically, interest expense deductions have been a large source of tax avoidance in Canada and around the world, and Canada is following the BEPS recommendations. Those rules are now in place, and we're getting our first filings this year under those rules.
Liberal
Ryan Turnbull Liberal Whitby, ON
Did we not also strengthen the transfer pricing rules, which I think you already mentioned? Can you speak to those?
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
There are proposals to strengthen the transfer pricing rules. We would be happy to see them enacted at the CRA.
Liberal
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
Absolutely. There have been recent changes to strengthen the general anti-avoidance rule, and I think my colleague Trevor would like to speak to that.
Associate Assistant Deputy Minister, Tax Legislation, Department of Finance
There were recent changes to enhance the functioning of the general anti-avoidance rule after it had been around for a number of years. Those include information-reporting rules built upon experience we learned from Quebec, actually—imposing a penalty that can be applied only where a transaction hasn't been reported, with the idea that it will help the Canada Revenue Agency identify aggressive tax planning.
Liberal
Ryan Turnbull Liberal Whitby, ON
Thank you. I realize, Ms. MacLean, that you said there are better tools, a better information exchange and a more comprehensive regime. You also talked about audit resources. I'm sure that, with limited audit resources, you have to decide and determine where to expend those resources most efficiently.
Are you using AI at all? I heard Mr. Lemieux talk about technology advancements helping to target the use of those resources based on risk. Are you using AI currently, and can you give us an update on that?
Assistant Commissioner, Compliance Programs Branch, Canada Revenue Agency
As Alexandra explained, we are getting more information, so it's now time for us to put all of that information together. We have some advanced business intelligence tools, and yes, we are looking into using AI to make the link between all that different information so that we can pinpoint which business or taxpayer we need to audit and review.
There is a lot that comes out of the data that we need to exploit.
Acting Director General, International and Large Business Directorate, Compliance Programs Branch, Canada Revenue Agency
Very quickly, I did mention our algorithmic system, which is loosely AI, but as Monsieur Lemieux mentioned, we are very active in the AI space. It is early days. We have to make sure we keep taxpayer data secure as we start to deploy AI.
Liberal
Ryan Turnbull Liberal Whitby, ON
My last, quick, question is for the gentleman over here. I can't see your name tag—I apologize. Mr. Kelly asked you about investigations, and you said that you make referrals. How many referrals have you made for investigation?
Director General, Criminal Investigations Directorate, Compliance Programs Branch, Canada Revenue Agency
Do you mean in total? I don't have that data. It's annually.... It depends. I think, right now...I'd have to get back to you. I don't remember, off the top of my head.
Liberal
Director General, Criminal Investigations Directorate, Compliance Programs Branch, Canada Revenue Agency
Yes.
Liberal
The Chair Liberal Karina Gould
Thank you very much, Mr. Turnbull.
It is now over to Mr. Simard for two and a half minutes.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Madam Chair.
Mr. McGowan, I imagine that the work you do tends to focus on flushing out those who evade paying their taxes. I imagine there's an investigative component.
Fighting tax crime is like fighting any other crime; you need deterrence and punishment. As someone looking at it from the outside, I often get the sense that punishment isn't one of the strategies you use. I asked you about a specific regulation earlier. I could also bring up everything I've read about voluntary disclosure, although I am aware that some measures have been taken on that front.
I'd like to hear what you have to say about punishment, specifically. That should be music to the ears of my Conservative friends. Are any measures in place to put a cost on tax evasion? If so, are the penalties hefty enough to deter people from using these schemes? I would appreciate hearing any examples you could give.