Honourable senators, I rise today as the critic of Senator Downe’s Bill S-217, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax). Although I am the critic, I fully support this legislation and hope that this time it completes its journey to becoming law.

As most of you know, Senator Downe has been a consistent advocate on this issue for over 10 years. His first Senate public bill on the matter was tabled in April 2015 with Bill S-226, which died on the Order Paper following the election that year. He reintroduced the legislation as Bill S-243 in 2018, which was passed in this chamber with minor committee amendments and reached second reading in the House of Commons.

Bill S-258 was the next version, which was introduced in March 2023, and it incorporated amendments which had been recommended during the debate on the previous bill. Bill S-258 was passed at second reading and subsequently studied at our National Finance Committee, where we held two meetings on the bill and heard from the Canada Revenue Agency and the Parliamentary Budget Officer, or PBO.

While the Canada Revenue Agency tried to make the case that the bill was unnecessary and unwarranted, the PBO at that time strongly endorsed it, saying that Bill S-258 would strengthen the PBO’s ability to access the data on the tax gap that is required to conduct an independent analysis. He went on to say that he also believed that such an analysis would greatly benefit parliamentarians and the Canadian public.

Bill S-258 was passed by this chamber without amendments in June 2024. Unfortunately, this bill died on the Order Paper in the other place with the prorogation of Parliament.

The current bill, Bill S-217, has received significant scrutiny over the years and strong support from this chamber on multiple occasions. I sincerely hope this latest version will receive the same support not only in this chamber but in the other place as well.

Bill S-217 is unchanged from Bill S-258. It proposes three main amendments to the Canada Revenue Agency Act. Firstly, it requires the Canada Revenue Agency to produce statistics on the tax gap at least once every three years. Secondly, it obliges the Minister of National Revenue to share tax gap data with the Parliamentary Budget Officer. Lastly, it mandates the Canada Revenue Agency to publish in its annual report to the Minister of National Revenue a list of all convictions for tax evasion, including those related to international offences.

The tax gap refers to the difference between the amount of tax that should be collected and what is actually collected. While calculating it is not an exact science, given that it often involves hidden income or honest errors, credible methodologies do exist to estimate a reliable range.

In 2022, for example, the Canada Revenue Agency estimated that Canada’s gross tax gap was between $35 billion and $40 billion, roughly 9% of total federal revenue. It also projected that it could recover about $17 billion through enforcement efforts, leaving a net gap of $23 billion.

Why does this matter? It is because measuring the tax gap gives us an essential diagnostic tool, a benchmark that tells us how effectively our tax system is functioning. Without it, we lack a clear sense of whether enforcement measures are working, and we are left with no meaningful way to assess progress.

As I noted in my speech on Bill S-258, while simply measuring the tax gap solves nothing on its own, it is very much like taking a reading of someone’s vital signs: It reveals if something is wrong and whether it is getting better or worse. If your tax gap is high, you know you have a problem; if your tax gap is rising, your problem is becoming worse; but if your tax gap is dropping, you’re doing something right.

This data can help government improve revenue collection, assess tax policy, promote fairness, allocate enforcement resources more efficiently, build better compliance strategies and more accurately evaluate the Canada Revenue Agency’s work. However, despite the value of measuring the tax gap, until a few years ago, Canada had no consistent approach to tracking it. That began to change in 2016, when the agency started releasing reports on specific components of the tax gap, including the methods used to estimate them.

In 2022 the agency published its first comprehensive report, Overall federal tax gap report: Estimates and key findings for non-compliance, tax years 2014-2018, which examined all major federal tax sources.

As noted on the Canada Revenue Agency’s website:

The CRA’s tax gap program plans to publish the second overall tax gap report in 2025 (target: end of June) with updated estimates and key findings up to tax year 2022 . . . .

Interestingly, the Canada Revenue Agency points out, “This approach is aligned with the proposal in Bill S-258 by Senator Percy Downe in March of 2023.”

Honourable senators, I believe this is an acknowledgment on the part of the Canada Revenue Agency that Senator Downe’s work has already made a difference. Although the fact that the steps taken by the CRA are encouraging, they continue to fall short in three key areas.

First of all, there is no statutory requirement for the agency to continue to do the work required in order to release reports on specific components of the tax gap. Given the value of this information to Parliament, producing it on a timely basis must be a requirement imposed on the agency by law rather than something which is left to their discretion.

Regular legislative reporting on the tax gap is necessary in order to track progress over time. Bill S-217 would fix this by mandating tax gap reports every three years.

The second way the existing process falls short is that there is currently no obligation for the agency to share tax gap data with the Parliamentary Budget Officer. Without access to this data, the PBO is limited in its ability to independently verify or assess the agency’s estimates — a significant gap in public accountability.

Bill S-217 addresses this directly, as I mentioned, to the satisfaction of the Parliamentary Budget Officer.

Thirdly, while the Canada Revenue Agency does publish some convictions for tax evasion, the current list is not comprehensive and provides little information about international cases. This lack of transparency hinders public accountability in efforts to combat offshore tax evasion. Bill S-217 would remedy this by requiring full disclosure of such convictions.

At its core, this bill represents a starting point in the fight against tax evasion. When individuals or corporations evade taxes, they avoid their fair share of the cost of public services, placing a greater burden on those who do pay, which undermines the integrity of the entire system.

Tax evasion also reduces government revenues, potentially leading to cuts in public programs or increased taxes on compliant citizens. These outcomes further erode trust in the government and its promises to combat tax evasion.

Although Bill S-217 would not eliminate tax evasion, it would be a strong step in the right direction. It would fill key information gaps that Parliament needs to perform effective oversight. It would increase transparency and accountability. It would support better enforcement and better policy making. And it would promote greater public awareness, which, in turn, would encourage voluntary compliance and strengthen confidence in the system’s fairness.

Honourable senators, while no tax system is perfect, we have a responsibility to make ours stronger and more equitable. Bill S-217 would help us do this. I encourage you to support this bill and allow it to proceed expeditiously to committee for further examination.

Thank you.

Yes.

Thank you very much for the question, Senator Pate.

I must say, no, I’m not surprised. I think the Canada Revenue Agency has struggled for a number of years. I don’t know why. I know you’re familiar with the report that was released by the Auditor General a couple weeks ago. They seem to be struggling with even the most basic functions. The way I look at it is that if you can’t fix your telephone system, then you really have a problem, and they can’t fix their telephone system.

So, no, I’m not surprised at all.

I do think legislation is the way to go. While they had indicated in the Standing Senate Committee on National Finance hearings that they didn’t need the legislation, I would not leave it up to them to voluntarily disclose this information. I think the best way to go is to make it a statutory requirement.

Yes, and I’m looking forward to hearing from the Canada Revenue Agency because, in addition to this new requirement, you’ll notice in the budget that they will also have to deal with some significant cuts and reassignment of resources.

Therefore, yes, I will be asking those questions. Thank you.