On March 29, 2023, I introduced the Fairness for All Canadian Taxpayers Act in the Senate. If passed, it would require the Government of Canada to disclose all convictions for overseas tax evasion and to measure the “tax gap” — the difference between what taxes should have been collected by the Canada Revenue Agency (CRA) and what is actually collected.
The proposed legislation would amend the Canada Revenue Agency Act to require the federal tax agency to report on all convictions for tax evasion, including a separate report listing all convictions for overseas tax evasion, in an annual report tabled in Parliament. It would require the Minister of National Revenue to report to Parliament on the tax gap every three years. It would also require the CRA to provide the Parliamentary Budget Officer (PBO) with data it has collected on the tax gap, and any additional data the PBO considers relevant to its own independent analysis of the tax gap.
Many other countries — the United States, the United Kingdom, Turkey and Sweden among them — measure their tax gaps and have found it to be a valuable policymaking tool. They all agree that money hidden overseas must come home, and that tax gap information helps to identify the dollar amounts involved and the measures required to fight overseas tax evasion.
The PBO testified before a Senate committee in March 2020 and said: “I am convinced … having worked both at the CRA and been PBO for a year and a half now, that there are hundreds of millions, if not billions, of dollars in taxes that go undeclared, unreported and that escape Canadian tax authorities, probably on an annual basis due to the international transactions that take place.”
For its part, the well-respected Conference Board of Canada published a report in 2017, titled Canadian Tax Avoidance: Examining the Potential Tax Gap, that concluded up to $47 billion in taxes could be going uncollected by the Government of Canada.
The CRA has produced some information about the tax gap after having been compelled to by the government, but we need more information. We need a series of reports to measure the effectiveness of CRA’s action; to see what’s working and what is not. My bill would enshrine that in law.
What the CRA is not doing is obvious by its inactivity on the Panama Papers disclosure, which revealed that hundreds of Canadians had money hidden overseas in Panama.
In the years since the release of account holders’ names in 2016, countries around the world with citizens identified in the Panama Papers collected over $1.36 billion in taxes that were owed to them but hidden in Panama.
As of 2021, the last year for which information is available, Australia had recovered nearly $138 million; Ecuador, $84 million; Spain, $166 million; and even Iceland, a country of 340,000 people, had recovered $25 million. Canada has not announced the recovery of a nickel. Zero.
The Fairness for All Canadian Taxpayers Act will not by itself solve the problem of overseas tax evasion, but it would help to clearly identify the size of the problem in Canada and force the government to make that information available to Canadians. The lack of convictions for overseas tax evasion undermines Canadians’ confidence in our tax agency and our government. Why are Canadians who hide their money overseas treated differently than the rest of us?
In the words of the Auditor General of Canada’s November 2018 report on the tax agency: “It is … important for parliamentarians and the public to have complete and transparent information. They need to assess whether the agency is meeting the government’s objective to crack down on non-compliant taxpayers, so that all taxpayers pay the right amount of taxes.”
Transparency is at the heart of my bill. It would require the CRA to be more open about what it is doing — and what it isn’t doing — to ensure Canadians have faith in the fairness of their taxation system. Otherwise, we have two classes of Canadians: those with the means to hide their money in tax havens and the rest of us, who have to pay more than our fair share to make up the shortfall.
By Senator Percy Downe
Senator Percy Downe represents Prince Edward Island in the Senate.