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
Kent MacDonald Liberal Cardigan, PE
Thank you, Madam Chair.
Thank you to the witnesses.
I'm sure you've done an analysis, so can you let me know, with Canada's tax avoidance.... The previous witnesses talked about evasion and avoidance and about avoidance not being criminal activity, but it is certainly costing Canada money.
Would you be able to speculate on how much that would be as a percentage of our GDP, and how that compares to, for instance, levels of tax avoidance in the U.K., Germany or Australia?
Govindadeva Bernier Director, Budgetary Analysis, Office of the Parliamentary Budget Officer
We haven't done that specific analysis. Because it's avoidance, it's hard to determine the exact amounts. I don't think there's any international comparison, because the tax systems are also different.
One ballpark amount would be to go into the latest CRA estimates of the tax gap. CRA provides some amounts in percentage of the corresponding tax revenue. I don't think CRA does it in percentage of GDP, but it's an easy calculation. It's something we could do, if requested by the committee with a motion.
Liberal
Kent MacDonald Liberal Cardigan, PE
Further to that line of questioning, what's your current estimate of the annual federal revenue loss to international profit shifting and tax haven use by Canadian corporations?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We currently don't have an estimate. I guess this speaks to the urgency of coming up with a comprehensive estimate around the tax gap.
Looking at the report we published in 2019 using 2018 data, we're looking at a number in the low billions with respect to multinational corporations. Again, it's 2019 based on 2018 data. It's very indirect. The data one would need to actually obtain a more precise estimate sits within the Canada Revenue Agency. We don't have access to it.
The Canada Revenue Agency, at around the same time, published a number of around $3 billion on the personal side, which included forgone revenue and tax revenue based on assets held internationally that were currently not being taxed.
Liberal
Kent MacDonald Liberal Cardigan, PE
In the previous hour, the witnesses from the Canada Revenue Agency told us they had put in new measures like the fully public beneficial ownership registry and mandatory country-by-country reporting.
Do you think those are going to improve the situation in order to comply with our tax laws?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a great question. It's a question we are probably not well placed to answer at this point. We are not intimately familiar with the internal operations of how CRA is planning on implementing those changes.
Certainly, if there were more data and information, we would be happy to analyze it.
Liberal
Kent MacDonald Liberal Cardigan, PE
There are suggestions that the minimum global tax might be set at 15%. Would you be able to speculate on how much revenue Canada could recover if that is fully implemented? Two stages of it are implemented now, and there was a third piece that was being reviewed.
Director, Budgetary Analysis, Office of the Parliamentary Budget Officer
An interesting point with the global minimum tax is the way the current rules are set up. Usually, it's the country in which the multinational is headquartered that has the first bid at applying this 15% minimum rate.
What the person from CRA or the official from the Department of Finance.... There's the UTPR, which would allow a country where the multinational is not headquartered to add a top-up on that if it wasn't already implemented, or if that 15% wasn't taxed by the home country where the multinational was headquartered.
There is one significant issue, I believe, where the United States recently asked for a carve-out of these rules, which means that potentially many of these multinationals.... There are numbers floating around that potentially up to 40%-50% of global tax avoidance by corporations is coming from U.S. multinationals.
If the U.S. wants to be carved out of those rules, it's going to be hard for countries like Canada to apply the top-up. We might get tariffs, or additional things like that, in retaliation, as we've seen with the digital services tax, which was scrapped.
Liberal
Kent MacDonald Liberal Cardigan, PE
We talked about the tax gap. Maybe I didn't fully understand what you said, but do you have an estimate of what the tax gap is now—money we're not collecting that we should be collecting?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No, we do not.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
CRA does calculate that.
The request originally came to us from Senator Downe, way back in 2012. At that point, we entered into consultations and discussions with the Canada Revenue Agency. The Canada Revenue Agency quickly concluded that, from its perspective, it is legally prohibited from sharing the relevant data with us that would allow us to calculate the tax gap. Ultimately, several years later, the CRA decided to calculate the tax gap on its own.
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Jacques.
Thank you, Mr. MacDonald.
Mr. Simard, you have the floor for six minutes.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you very much, Madam Chair.
Mr. Jacques, if I understand what you just said, the Parliamentary Budget Officer works based on the tax avoidance and tax evasion data that the Canada Revenue Agency provides, but, unlike the agency, the Parliamentary Budget Officer doesn't have the full picture.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's right.
Bloc
Mario Simard Bloc Jonquière, QC
That means that the reports you can prepare are based on the partial data you receive from the agency.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes. As we previously mentioned, to make an accurate estimate of the income gap, we would have to obtain confidential data that only the agency can access.
Bloc
Mario Simard Bloc Jonquière, QC
As an economist, you probably prefer the quantitative side of things to the qualitative side, but I'm still going to address the qualitative side.
I'm wondering how people can justify the use of tax havens. You may have already heard the Prime Minister say that using tax havens doesn't necessarily mean engaging in tax avoidance because, ultimately, you can still pay your taxes.
Do you think it's true that a company can use tax havens for reasons of competitiveness?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's important to distinguish between tax evasion and tax planning. In some contexts, it's possible to use incredibly complex tax planning while complying with the law. Having said that, I'm not a lawyer.
Bloc
Mario Simard Bloc Jonquière, QC
I understand, but we're chatting among ourselves. I don't want to make you do anything, but it still seems rather strange to me. It seems to me that, if I use a tax haven, it's for a certain financial gain, not for fun. I don't think it's a competitiveness strategy either.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think the same argument could be made about RRSPs.
Bloc
Mario Simard Bloc Jonquière, QC
If the situation is reversed, yes. I understand. You're clever.
Have you ever checked to see if there was a way to measure the effectiveness of the Canada Revenue Agency's measures to combat tax evasion?
I asked an official earlier about how many convictions there had been for tax evasion, and his answer left me a bit speechless. He told me that there had been 106, from 2020 to 2025. I'm not great at math, but that's around 22 tax evasion convictions a year across Canada. Either we're shockingly honest people, or we aren't taking the necessary measures to crack down on tax avoidance and tax evasion.
Do you have any comparisons?
Director, Budgetary Analysis, Office of the Parliamentary Budget Officer
In 2022, we published a report in which we compared the agency's performance to that of other international tax administrations. We relied on data from an international survey conducted by the International Monetary Fund and the Organisation for Economic Co-operation and Development. We compared things like the value of revenue from audits. Canada's performance was around average overall, so it wasn't necessarily among the best, but it wasn't among the worst either. We didn't have data on the number of convictions, though.
One point that the agency's representative didn't mention, but which has to be taken into account, is that these are probably complex files, since the taxpayers have been avoiding taxes for a number of years. It takes time to conduct investigations and collect data. Without patting the agency on the back, I think it's still important to recognize the complexity of those files. A conviction doesn't necessarily correspond to one year in which there was tax evasion. It can cover a number of years.
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Simard and witnesses.
We have Mr. Hallan for the next round of questions, for five minutes, please.