Moved third reading of Bill S-258, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax).

He said: Honourable senators, now for something completely different, I would like to thank the Chair of the National Finance Committee, Senator Mockler, as well as the members of the committee — Senator Dagenais, Senator Forest, Senator Galvez, Senator Gignac, Senator Loffreda, Senator MacAdam, Senator Marshall, Senator Pate, Senator Petten and Senator Smith — for their study of my bill. This was the second time that the committee has examined it, and I am pleased to note that, along with the improvement that they made the last time, their support for the bill remains unchanged.

I want to especially thank Senator Marshall, who has been a long-time supporter in the fight against overseas tax evasion. Her leadership has been outstanding on all financial matters that come before the Senate.

It would appear, colleagues, that support — at least, support for measuring the tax gap — is actually increasing. In testimony before the National Finance Committee, a representative of the Canada Revenue Agency, or CRA, spoke in glowing terms about the agency’s work on the tax gap. In fact, to hear the CRA talk about their work, one might think that, for years, the agency has been begging to measure the tax gap, and finally someone has let them follow their dream. I must say my recall of the past decade is very different.

Speaking as someone who has been, according to one reporter, “banging the drum” about this issue for a long time, I find this newfound enthusiasm for measuring the tax gap on behalf of the Canada Revenue Agency rather surprising. Better late than never, but experience leads me to take any statement from the CRA about their past accomplishments or future intentions with a grain of salt.

The reason we need this bill is to force the Canada Revenue Agency to do the right thing and be accountable to Canadians. Sadly, based on their past record, we cannot believe their public statements.

Colleagues, it would be very easy for me to stand here and recite a litany of past occasions when the statements and claims of the Canada Revenue Agency did not stand up to any scrutiny. So, colleagues, let’s do that.

The CRA has claimed that 90% of calls to its call centres were successfully completed and connected to an agent or the automatic helpline. The Auditor General of Canada looked at that claim, and it turned out that the CRA had achieved this seemingly impressive success rate by blocking 29 million of the 53 million calls received and excluding those blocked calls from the calculation. In other words, people called the CRA centre, and after a while their calls were simply disconnected.

When blocked calls and other factors were considered, the Auditor General found that “. . . the Agency’s overall success rate was 36 percent.” This was a serious attempt to mislead Canadians.

Another example from the CRA is that, over the years, 80% of applications from Canadians with diabetes for the disability tax credit were approved by the CRA. However, in 2017, that changed, and advocates noticed that almost all previously approved claims were now rejected. The agency claimed publicly that there had been no change to the eligibility criteria, but documents obtained by Diabetes Canada showed a Canada Revenue Agency email from May 2, 2017, modifying those criteria with what the agency called “. . . a new variable.” In effect, diabetics who had previously qualified for the disability tax credit were now disallowed. When confronted with the evidence of their misleading statement, the Canada Revenue Agency backed down.

Colleagues, in another announcement, the CRA claimed that the agency had a full-time dedicated unit focused on offshore non-compliance, giving the impression that this unit was new and represented an additional resource to combat overseas tax evasion. However, in response to a written question in the Senate, it was revealed that the International, Large Business and Investigations Branch was merely formed by reorganizing existing CRA assets and “. . . did not necessitate an increase or transfer of resources.” In other words, people already working for the agency were simply shuffled to a different part of the organization with no additional funding.

Then there was a claim of a different kind. In February and March of 2017, articles started to appear in newspapers and online across Canada praising the work of the CRA, bearing titles like “Federal programs in place to address offshore tax avoidance and evasion.” Another title was “How Canada is cracking down on offshore tax evasion and aggressive tax avoidance.”

I, of course, noticed these articles and read them with great interest since this was news to me. It was obviously the best press the CRA had ever received. After I filed a written question in the Senate, I found out years later that the CRA — operating under the premise that if you can’t earn good press, you can buy it — paid $300,000 for this sponsored content in six print and digital newspapers from across Canada. Now, colleagues, that’s fake news if I’ve ever seen it.

And, of course, there are the endless claims of money they have identified versus what they have actually collected, something members of the Senate Standing Committee on National Finance experienced during their study of Bill S-258. When asked by Senator Pate about what the agency had assessed and what they had actually collected in the wake of the Panama Papers, the Paradise Papers and the Pandora Papers, the agency replied in writing:

(A)udit actions have results in amounts assessed as owing as of March 31, 2023 as follows:

Panama Papers: $77,000,000

Paradise Papers: $1,800,000

Pandora Papers: NIL

So, colleagues, they have highlighted the degree of the overseas tax evasion burden Canadians are carrying.

However, in response to Senator Pate’s direct question about how much they have actually collected of that money, they replied, and let me quote them:

. . . the CRA . . . does not track payments against specific account adjustments like audits, as its systems apply payments to a taxpayer’s cumulative outstanding balance by tax year, which can represent multiple assessments, reassessments such as audits of different types, and other adjustments.

Well, colleagues, that clears that up. Really, it is to laugh or to cry with a reply like that.

Other countries can show hundreds of millions of dollars in owed taxes. A Panama Papers country such as Iceland with a small population, they collected over $25 million, and it goes on and on to billions of dollars that have been recovered from these tax leaks, but in Canada, we don’t know if they have recovered a cent or if they are still auditing. We know of no money that has actually been collected.

This history of false statements and evasive answers on the part of the Canada Revenue Agency is why I have included in my bill language that would not only require the CRA to continue to measure the tax gap but would also require it to cooperate with and support the Parliamentary Budget Officer’s independent examination. It is good for the CRA to measure its own performance, but it is not enough. “Trust, but verify,” as Ronald Reagan used to say, and when it comes to claims by the Canada Revenue Agency, the emphasis should be on “verify.”

Colleagues, as I said at second reading, this is the third time I have introduced this bill in the Senate. I thank you for your past support for the previous times, and I ask for it one more time. Perhaps this time both chambers will see fit to enshrine this bill into law and ensure that Canadians receive the accountability and transparency they deserve from their revenue agency.

To that end, I am calling on the members of the House of Commons to join the Senate in the fight against overseas tax evasion and pass this legislation.

Will you take a question, Senator Downe?

Yes.

I understand the rules are a little different. The Canada Revenue Agency, I want to be clear, does an outstanding job on domestic tax evasion. If you’re a carpenter in New Brunswick, if you’re a waitress in Saskatchewan, if you’re a lawyer in Vancouver and you try to commit tax fraud, you’re likely to be caught.

The weakness of the agency is that they have no capacity to manage and little understanding of overseas tax evasion. This goes back about 11 or 12 years, when there was one leak from one bank in Liechtenstein where over 100 Canadians had accounts containing hundreds of millions of dollars. No one was charged for that. The CRA’s position, after there was a public disclosure of all the information, was that they’re learning how this works so that they can get people in the future. Well, that simply didn’t hold up, because after that, we had leaks in Panama, and the list goes on and on.

All of these banks — or law firms, in the case of Panama — had Canadians with accounts. As we know, it’s not illegal to have an account overseas. It is illegal not to declare the proceeds from that account. Maybe someone from Liechtenstein was there on vacation and just decided to open an account in a tax haven — or maybe they were trying to defraud Canadians.

As we all know, in Ottawa, when any senator has a proposal, there are two replies: “That’s a wonderful suggestion,” and “How are we going to pay for it?” We pay for it by getting back what the Parliamentary Budget Officer says is up to billions of dollars owed to the Canadian government that has not been collected by our revenue agency.

What the tax gap does is measure the difference between what the Canada Revenue Agency, or CRA, collects and what they should be collecting, so Canadians will have that number. Second, once you have that number, you know how effective your agency is. Are they doing a good job? I don’t think they are, but we could find out when we have those numbers.

Thank you, Senator Downe, for your comments. Every incident you spoke of is one I can remember, so I share your opinions and views.

Honourable senators, I rise today to speak at third reading of Bill S-258, an Act to amend the Canada Revenue Agency Act. I’ll be brief, but allow me to put a few comments on the record.

Since its inception, Bill S-258 has set out to address a fundamental gap in our understanding and management of the tax gap, which is the difference between the taxes that should be collected and what are actually collected.

This legislation is not merely about numbers; it’s about fairness, transparency and the reinforcement of a tax system that is equitable to all Canadians. These are laudable goals, and Bill S-258 implements three measures to bring us closer to them.

First, Bill S-258 mandates that the Canada Revenue Agency provide a detailed list of all convictions for tax evasion, including international tax evasion, in its annual report to the Minister of National Revenue. This requirement not only enhances transparency but also serves as a deterrent, reinforcing the message that tax evasion is a serious crime with real consequences.

In testimony at our Finance Committee, the value of this deterrence was acknowledged, both by officials from the Canada Revenue Agency and the Parliamentary Budget Officer. The latter noted that:

. . . Publishing the list of convictions for tax evasion in the annual report would be another opportunity to point out the consequences of overseas tax evasion, by providing some context, of course. This could have an additional deterrent effect beyond what is already being done.

Second, this bill introduces a requirement for the Canada Revenue Agency to report statistics on the tax gap every three years. This is a pivotal move toward greater accountability, and enables both parliamentarians and the public to gauge the effectiveness of our tax system as well as the agency’s efforts in tax collection and compliance. It empowers us with data to make informed decisions on tax policies and resource allocations.

This three-year reporting cycle was the result of an amendment of an earlier version of the bill after Canada Revenue Agency officials expressed concern that annual reporting could initially prove to be onerous. Currently, the U.K. reports on its tax gap annually, but as noted by CRA officials, they have been producing those reports for almost 20 years, having started in 2005. The agency confirmed that a three-year time frame is very doable and is the international gold standard.

Third, the bill stipulates that the minister must provide tax gap data to the Parliamentary Budget Officer. This provision ensures an independent assessment of the tax gap, enhancing the credibility of the data and our understanding of tax compliance challenges. This is a critical component of the bill. The Parliamentary Budget Officer provides independent cost estimates and financial analysis to Parliament for the purposes of raising the quality of parliamentary debate and promoting greater transparency and accountability.

In the past, the Parliamentary Budget Officer has had difficulty obtaining the information he needs to assess the tax gap. Bill S-258 will help to address this deficiency.

I would note that the impact of tax evasion on our society is multifaceted. It’s not just about lost revenue; it’s about the integrity of our tax system and the public’s confidence in it. Tax evasion undermines the public’s belief in the fairness of our system. When individuals or corporations evade taxes, they shift the burden onto honest taxpayers and deprive the government of funds needed for crucial public services. This can lead to a sense of injustice and erode the social contract between citizens and the state.

Bill S-258 does not claim to solve all problems related to tax evasion or those of the Canada Revenue Agency. However, it represents a significant step forward in enhancing the transparency of our tax system and strengthening our collective efforts to tackle tax evasion. It paves the way for more informed policy-making and better resource allocation.

In conclusion, honourable colleagues, I urge you to consider the benefits of this bill not only in terms of revenue collection but in fostering a culture of compliance and fairness in our tax system. Please support Bill S-258. Thank you.