Thank you, Mr. Chair.
This afternoon I am joined by Lisa Anawati, the director general of the international and large business program directorate within the CRA. She has direct responsibility for aggressive tax planning.
We are pleased to have the opportunity to come before committee today to support your consideration of chapter 3 of the OAG 2014 spring report.
Given that my opening remarks are in the binder, I will limit myself to a few key points so that we have more time for questions.
The focus of my remarks will be on the three recommendations made by the OAG.
At the outset, it's important to note that there are a number of legal ways that taxpayers can reduce the amount of taxes they're required to pay. Claiming allowable tax credits and deductions, sheltering investments inside tax-free savings plans, and offsetting business losses against income are just a few examples. In fact, the government encourages Canadians to take advantage of legitimate tax savings wherever they can.
Aggressive tax avoidance occurs when a person takes part in schemes or transactions that are clearly abusive in nature, where their primary purpose is to avoid the payment of required taxes. While these transactions may comply with the letter of the law, they clearly violate the spirit and intent of the law.
The Auditor General's report focuses on aggressive tax planning. They looked at four specific abusive planning arrangements selected for the audit and they confirmed that the CRA has delivered positive results in all four cases. While the Auditor General confirmed that the CRA has the tools required to detect, correct, and deter non-compliance of taxpayers using aggressive tax plans, our objective is to further enhance CRA's approach. The Auditor General made three recommendations to help us do exactly that.
The first one was on risk assessment. The OAG recommended that the CRA test the effectiveness of the national risk assessment model (NRAM)—the formal tool that identifies the most high-risk files. The CRA has developed plans to conduct this testing and we are on track to have ongoing testing of the tool during the 2015-2016 fiscal year.
Second, the OAG made recommendations with regard to training. The OAG recommended that the CRA monitor the training progress of our aggressive tax planning auditors against their learning paths and use this information to identify training gaps. A learning path is a document that sets out the required courses and other training that we expect our auditors to receive. A training framework has already been developed and this full exercise will be completed by March 31.
The third formal recommendation made by the Auditor General touched on performance measures. The Auditor General recommended that the agency re-evaluate its performance measures for its aggressive tax planning program and develop measures and indicators that better reflect program success. There was a focus on an internal measure known as taxed earned by audit, or TEBA. The Auditor General observed that some important results were not being included in TEBA and other desirable outcomes could actually make taxed earned by audit go down.
The CRA has committed to developing a list of relevant performance measures by March 31, 2015. This work is already under way and we have already made an adjustment to our TEBA coding practices so that we can better measure the performance of the aggressive tax planning program. As reflected in the detailed action plan submitted to the committee, the CRA has been active in addressing this chapter and has plans in place to meet all of the commitments made in our management action plan.
In closing, the CRA recognizes the importance of the aggressive tax planning audit program. We have a responsibility to continue to improve this program and we appreciate the recommendations the OAG has made that will help us strengthen it.
Thank you, Mr. Chair. I, too, remain open to questions.