Mr. Speaker, I rise this evening to oppose private member's Motion No. 485 and to take this opportunity to highlight some of the most significant steps our government has taken to tackle the growing problem of international tax evasion and aggressive international tax avoidance, a problem that the previous Liberal government completely ignored.
If my hon. colleagues had only taken a moment to listen to the member for Winnipeg South Centre, they would have heard a number of their questions answered.
This is an extremely complex issue. Therefore, let me begin by stating the obvious, that Canada's tax system is based on the premise of self-assessment and voluntary compliance. Canadian taxpayers, individuals, corporations, and trusts, are required by law to file their fax returns on time and to pay whatever taxes they owe in full. To comply with Canada's tax laws, Canadians who invest abroad must report their worldwide income and pay the correct amount of tax on those earnings. The majority of them do.
It does a disservice, quite frankly, for opposition members to state that somehow everyone with a foreign bank account is not paying tax or is deliberately trying to hide tax. Indeed, the vast majority of Canadian taxpayers are honest, law-abiding citizens. They file their tax returns, report their income, and pay whatever taxes they owe as required by law. When these honest Canadians hear about those who attempt to evade or avoid their tax obligations, particularly where the potential loss of revenue is significant, they are justly outraged. They want to know, and indeed deserve to know, what their government is doing about it.
Let me assure members of the House that our government takes the abuse of Canada's tax laws very seriously. Tax evasion and aggressive tax avoidance, whether domestic or international, places an unfair burden on law-abiding taxpayers and businesses. They erode public trust in the tax system and jeopardize the integrity of Canada's tax base. I believe everyone in the House would agree with those words.
I understand the intentions of the member of Parliament for Rivière-du-Nord in proposing a motion to study Canadian tax losses due to international tax evasion and the use of tax havens. However, I would argue that attempting to measure the so-called tax gap is not the most effective solution to this complex global problem. I think the member opposite knows this as well.
The Organisation for Economic Co-operation and Development, the OECD, has reported that “Given the widely varying types of non-compliance behaviours that comprise the overall tax gap, it will be apparent that measuring its overall size is a difficult, costly and (some would say) inevitably quite an imprecise undertaking.”
Those are not the government's words. Those are the OECD's words.
For the sake of clarity, let me explain that the tax gap is the difference between the tax revenues the government actually receives in a year and the tax revenues it would receive if all taxpayers respected their tax obligations under the various acts and regulations administered by the Canada Revenue Agency.
Here comes the rub. Estimating the income that is deliberately hidden in secret offshore investments is virtually impossible with even a minimal degree of accuracy or reliability. By their very nature, tax evasion and tax avoidance are difficult to quantify since they involve people or entities deliberately and aggressively hiding money from the government.
Therefore, like the vast majority of OECD countries around the world, Canada does not estimate the amount of revenue lost to international tax evasion and aggressive tax avoidance. However, to that point, I must stress that our government takes the issue of international tax non-compliance extremely seriously and it is by no means turning a blind eye to the problem. One of my colleagues has already summarized the important measures that our government introduced in economic action plan 2013 to tackle international tax evasion and aggressive tax avoidance.
These new measures and tools will strengthen the Canada Revenue Agency's ability to identify and audit abusive tax schemes and arrangements that use offshore jurisdictions to hide assets and income.
On January 15, the hon. Minister of National Revenue announced the launch of the new offshore tax informant program, which is one of the economic action plan measures I just mentioned.
For the first time, the Canada Revenue Agency is in a position to financially reward individuals when they provide information that leads to the assessment and collection of additional federal taxes in cases of major international tax non-compliance. Informants are now able to contact the Canada Revenue Agency through a toll-free number that is accessible throughout North America and a local number that can be reached from anywhere in the world.
After considering the information provided, and there is a very clear protocol, the Canada Revenue Agency may enter into a contract with the informant if the federal tax owing, excluding interest and penalties, is more than $100,000 and all other program requirements are met.
Of course, no payment would be made to anyone already convicted of tax evasion in relation to the information provided. Our government will not reward tax cheats from turning on one another.
Regardless of whether the information ultimately results in a payment under the program, the Canada Revenue Agency can use the information provided to carry out its mandate to ensure compliance with Canada's tax laws. Offering a reward for information about major cases of international tax non-compliance would both encourage those with information to come forward and discourage Canadians from breaking the law in the first place.
The new offshore tax informant program is not the only way the Canada Revenue Agency obtains information about tax non-compliance. The agency already has an informant leads program in place that accepts information about all forms of tax non-compliance, although it does not pay informants for such information. The informant leads program can be used to report cases of international tax evasion and aggressive tax avoidance that fall below the $100,000 threshold that is set for the offshore tax informant program.
Taxpayers with previously undisclosed income may also avail themselves of the Canada Revenue Agency's voluntary disclosures program. Should Canadians choose to rectify their tax affairs through voluntary disclosure, they may be able to avoid penalties and prosecution for tax evasion and only have to pay the taxes they owe, plus interest.
Taxpayers file many different types of disclosures in relation to income and property located outside of Canada. For example, CRA has received a significant number of disclosures in relation to foreign asset reporting information and investment income located offshore. To be eligible for the voluntary disclosures program, taxpayers must come forward and file a valid disclosure before they become aware of any compliance action that CRA begins against them.
We encourage all Canadians with unreported or underreported income to avail themselves of the voluntary disclosures program, pay their taxes upfront, or otherwise the financial penalties for being caught cheating on their taxes could be dire.
While our government will not support Motion No. 485, Canadians can rest assured that we are taking strong action to protect the integrity and fairness of Canada's tax system. We believe that following up on information and intelligence provided by informants is one of many effective solutions to addressing the complex issue of international tax non-compliance.
This is more effective than attempting to substantiate some elusive “tax gap” that only exists because someone is deliberately and very aggressively, and usually with a fair amount of finesse, hiding income offshore. That so-called “tax gap” is almost impossible to quantify. The OECD says that it is impossible to quantify, and we believe it. However, that does not take the burden off government to aggressively follow up on international tax evasion and international tax cheats. It actually increases the burden on government to aggressively seek out people who are not paying their income tax or who are hiding their money offshore.
As my hon. colleague from Winnipeg South Centre said earlier, there are a number of tools in the government's toolbox. We are using every single one of them to aggressively search out these tax cheats and make sure they are in compliance. If not, we will use the force of the law to force them into compliance.