Moved second reading of Bill S-217, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax).

He said: Honourable senators, you will note that this is not the first time I have tabled this bill, the fairness for all Canadian taxpayers act, requiring 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 and what is actually collected. It would also require the Canada Revenue Agency, or CRA, to provide the Parliamentary Budget Officer, or PBO, with data it has collected on the tax gap, as well as any additional data that the PBO considers important so he can prepare his own independent analysis of the tax gap.

In the previous Parliament, this bill passed the Senate and made it to the second reading in the House of Commons, when the election was called.

Let me begin, as I always do, with this disclaimer: It is not illegal to have a bank account overseas. But it is illegal not to report any proceeds from those accounts to the Canada Revenue Agency.

It used to be that the Canada Revenue Agency didn’t attract a great deal of attention, either from the public or from the government. As the one branch of government counted on to turn a profit, there has always been a temptation to simply let it go about its business: If it’s not broken, don’t fix it.

However, that confidence has been eroded as we have seen story after story about overseas tax evasion with no punishments and, unfortunately, little or no recovery of money, compounded by the repeated response of the CRA after each public disclosure that they are working hard to catch overseas tax cheats; that they take it very seriously; that they’ve identified, as opposed to collected, X amount of money; that work is ongoing; that “we have much work to do”; and so on.

Unfortunately, these comments from the CRA belie the fact that their efforts and results are disappointing in the extreme. One of many such examples is in the aftermath of the Panama Papers in 2016. In the nine years since the release of the papers, which identified hundreds of Canadians holding accounts, other countries with citizens identified in the documents as having accounts hidden in Panama have collected to date over $1.8 billion in taxes that were owing to their countries.

A recent article, just a few months ago, by the International Consortium of Investigative Journalists, the body that broke the story on Panama Papers, indicates that Australia has already recovered $44 million; Germany, $87 million; Spain, $175 million; and even Iceland, a country of 340,000 people, has recovered $25 million. But for all the hundreds of accounts and dozens of audits, Canada hasn’t announced the recovery of a nickel — zero.

According to the investigative journalists’ consortium, the CRA expects to collect almost $92 million in money, but, as we know, there’s a considerable difference, particularly it being the CRA, between “expect” and “collect.” Of the approximately 900 Canadians identified, including individuals, corporations and trusts that were named in the Panama Papers, not one person has been charged, much less convicted, of overseas tax evasion in this affair. That begs the question, if the CRA has identified them — they think there is $96 million owing — why has no one been charged?

In October 2012, almost 13 years ago, I wrote to the then Parliamentary Budget Officer, asking him to investigate the economic impact of overseas tax evasion. At his suggestion, that investigation evolved into an effort to determine the tax gap, the difference between what should be collected by the CRA and what they actually collect. The PBO determined that it is indeed possible to provide an estimate of the gap, particularly given that so many other countries are doing it, and approached the CRA to secure the agency’s cooperation in this effort.

Colleagues, the CRA refused to cooperate, and we know why when we realize that the tax gap not only measures what should be collected but also measures how effective our national revenue agency is in their duty and responsibility to collect money owed to the Government of Canada.

I am sure that the exposure, through a tax-gap analysis of the terrible job the CRA is doing in fighting overseas tax evasion, was a major factor in the agency’s refusal to cooperate with the Parliamentary Budget Officer. But even without the cooperation of the CRA, the PBO was able to come to his own conclusion about the tax gap. He testified before a Senate committee in March 2020 stating that, based on his own analysis:

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 entitled Canadian Tax Avoidance and Examining the Potential Tax Gap. They concluded that up to $47 billion worth of taxes is not being collected by the Government of Canada.

On its website the Canada Revenue Agency maintains a list of “enforcement notifications.” These are press releases about investigations, charges and convictions for offences related to tax evasion. It does so, in its own words:

. . . to maintain confidence in the integrity of the self-assessment system, and to increase compliance with the law through the deterrent effect of such publicity.

It’s hard not to laugh when you read that.

If you look at the list, colleagues, as I did recently, you will find a wide range of people from coast to coast to coast charged and punished, almost all for domestic tax evasion. If you hide your money overseas, your chances of being caught are very low, whereas if you cheat on your taxes domestically, you are very likely to be caught, fined and, in some case, jailed.

To that end, of all the notices — and there were 65 going back to 2020 when I recently checked — only 3 were convictions for what one might call overseas tax evasion, and I am being generous with that figure.

This does not mean that recent years have been without some measure of success. The 2015 election platform of the Liberal Party contained a commitment that involved:

Directing CRA to immediately begin an analysis and stronger enforcement of tax evasion, or what the OECD calls the “tax gap.”

The agency, for all its past reluctance, has been forced by the government — and with continuing reluctance — to begin releasing a series of reports on the tax gap starting in 2016, with the most recent one released in 2022.

However, Canada needs to study the effectiveness of the CRA to see what is working and what needs improving. The decision of whether or not to pursue this study should not be left to the CRA alone, given their refusal to cooperate with the PBO. It should be required by legislation, and that’s what my bill would provide.

I wish to emphasize that a legislative requirement for the CRA to report on overseas tax evasion and the broader tax gap in general is not the result of mere curiosity. Many other countries — the United States, the United Kingdom, Turkey, Sweden, even the State of California — measure their tax gaps and have found it to be a valuable policy-making tool. They all agree that the money hidden overseas must come home, and they need continued tax-gap information to identify the dollar amounts involved and to help bring that money back to their countries.

As I said, colleagues, in Canada there is essentially no risk to hiding your money overseas because your chances of being charged or convicted range from slim to none. And the “hundreds of millions, if not billions of dollars” identified by the PBO will not, as if by magic, solve our financial problems. But if we collected even a portion of that money owing, it could reduce the deficit, taxes could be lowered and programs could be funded.

It is undeniable that a significant amount of money is lost to this country through overseas tax evasion. Beyond that, of course, is the simple fact that it is grossly unfair. Those of us who are playing by the rules and paying our taxes are being deceived by other Canadians who are skipping the system and hiding their money overseas. The failure to collect taxes owed undermines the confidence that everyone is being treated the same. If we are all in this together, then we all pay taxes. Otherwise, there is special treatment for some Canadians with the resources to hide their money while the rest of us must pay more to make up that shortfall.

Before I wrap up, I’d like to express my thanks to those senators who delivered speeches in favour of this bill in the past, and the bill currently before the Senate is the same bill that they supported. The support of Senator Paul McIntyre and Senator Pat Bovey — both of whom have since retired — Senator Galvez, Senator McPhedran and Senator Marshall is much appreciated. I thank them for that support. Indeed, I thank all senators who passed this bill in the Senate last time, and we hope for common sense to grip the House of Commons this time so they will pass it as well.

I will conclude with this comment: I always wonder, when people hide their money overseas, if they or a member of their family become ill, do they get their medical care in a place like Panama or do they return to Canada to take advantage of our publicly funded health care even if they don’t want to pay a cent towards it?

Colleagues, I hope I can once again get your support for this bill.

Senator Downe, will you take a question?

Yes.

Thank you. What reason does the CRA give for not responding to your inquiries? There must be some attempt at logic that they’re putting forward in that regard. I’d love to know what it is.

Also, do you see any opportunity in this Prime Minister’s decision to have one minister responsible for national revenue and finance to potentially get past the roadblock that you’ve faced for so many years?

Thank you, Senator Deacon. To the first question, the CRA was asked by the PBO, the Parliamentary Budget Officer, for some data that would allow them to address the tax gap, but it was not any personal information on any individual Canadian. It was raw data. The CRA refused to provide that, even though, as I said, other countries are currently measuring their tax gap. They have this data and they know how to do it. That’s why this legislation is required to overcome the roadblock that the CRA keeps putting up.

On your second question, I think it’s a tremendous move. I remember years ago, when I had the honour to serve as Chief of Staff to former prime minister Jean Chrétien, I attended every federal cabinet meeting. There was never a meeting when anyone raised the CRA. Why would you? You assumed they were doing their job and the money was coming in. The CRA minister participated in agriculture and defence discussions, but there was nothing about the CRA.

This is a good move by this Prime Minister. The Minister of Finance will be able to keep oversight of the CRA, which desperately needs it. I think it’s a very positive step.

They just said “no” to previous requests? There was no rationale given, no logic, no reasons at all? They just refused?

These are actually good questions for the PBO. I’ve talked to him and his office, as well as the previous PBO and the PBO before that. This has been going on for a long time. This issue has been going on longer than the bridge tolls. This is now year 13, and bridge tolls only took 10.

The CRA makes the argument that they shouldn’t be giving this data because somehow it could infringe upon Canadians’ privacy, but they take great pride in not measuring the tax gap.

They were forced by the 2015 Liberal election platform to start measuring. They do one on the underground economy — one on this and one on that. We don’t need that. We need the overall tax gap analysis.

As I said, if the State of California can do it, you don’t have to look at all these other countries, such Sweden and so on. If they can do it, why can’t we do it?

And the reason you do it, of course, as I indicated in my speech, is you identify how much is owing. The Conference Board of Canada said up to $48 billion could be possible. But you also measure how effective they are compared to their counterparts in other countries in collecting the money they should be collecting.

If the Conference Board of Canada is right, and it’s up to $48 billion, we assume we won’t collect all that. But let’s say you collect half of it. Senator Pate has a proposal here, and everybody else has a proposal of the first question to ask: That’s a great plan, but how are you going to fund it? Well, there’s a pot of money that’s not being collected at the moment. It’s a real problem.

And, as I indicated, it’s a gross unfairness of the system. When I first stumbled upon this years ago, in Liechtenstein, there was one employee at one bank who stole the client list and sold it to the Government of Germany. And there were a hundred and some Canadians who had an account in that one bank in Liechtenstein. I had to look up Liechtenstein on a map; I didn’t even know where it was.

Maybe those people had family members in Liechtenstein, and it could all be legitimate. But at the end of the day, the CRA did not charge anyone with the money that they found in those accounts. At the time, the argument from the CRA was that we’re now learning how this works for future cases.

Since then, we’ve had the Paradise Papers, and we’ve had the Panama Papers — all of these and nobody has been charged. But if you’re a waiter in Moncton or a carpenter in Saskatchewan and you’re cheating, you’re caught and you’re charged, and some people go to jail.

There’s nobody that the CRA can point to in Canada who has gone to jail for overseas tax evasion, even though in the Panama Papers, they indicated they think there’s $96 million. That’s a clear indication that people were in clear violation of the law. Why is no one charged?

Just to go back and conclude, in Liechtenstein, when they released the information to all the countries, the Australian government took great action. They formed a task force of various departments to jump right on this overseas tax evasion. They started to charge people. They publicly indicated who was being charged. And they found that not only did they collect a whole bunch of money — unlike Canada — but the people who were publicly named and charged decreased the appetite of the rest of the population to hide their money overseas. There was a naming and shaming. None of that happens in Canada.

Would you take a question, Senator Downe?

Yes.

Thank you very much for continuing to introduce this. As I think you may be aware, when I was on the National Finance Committee, I asked questions about the tax gap and why no investigations had been conducted into the Panama Papers, the Pandora Papers and the like.

I’d be interested in your comments on the response I received, which was that these are complex investigations. I received a similar response when I asked why corporations here in Canada weren’t being investigated under some of the competition laws.

Do you have any other comments that you’d like to add to elucidate this area, seeing as it’s your area of expertise?

The CRA has a problem retaining a lot of people because once they’ve been there for a while and have built up a certain skill set, they actually go to the other side. Companies that are involved in hiding money overseas like to hire them. We have to adjust the pay scales of the CRA to recognize their unique skill sets. That’s the first thing.

The second thing is this: I hear this complicated argument, and as I indicated in response to Senator Colin Deacon’s question, in Liechtenstein they told us they were learning how these situations work. At the bank in Liechtenstein, which I referred to, you couldn’t open an account unless you had $500,000, so it’s a certain clientele, if you will.

It’s complicated for us, but it’s also complicated for all these other countries, yet all these other countries have either collected the money or charged people. For example, I don’t recommend this, but the Irish government would print your home address after you’ve been convicted of overseas tax evasion. I think that would be quite unpopular. But the naming and shaming have proven to be a valuable tool for people charged.

If they haven’t figured it out now after 13 years, are they ever going to figure it out?

My understanding is it would go back — like all revenue from the CRA — into general revenue for the Government of Canada.

Part of the CRA’s answer as to why they haven’t recovered any of this $96 million is — they told me in writing just recently — they don’t track how much they collect in overseas tax evasion. It’s laughable.

They’re not tracking it because they haven’t received any of it. The short answer to your question is it would go into general revenue.

Thank you. No, I have met with CRA officials, and I kept saying to them, “Rather than defending the status quo, you should be asking how does this end?” It’s like a chess game. You’re going to be there eventually. You’re going to have to do a tax gap analysis. At the time, they wouldn’t even talk about doing a tax gap analysis. They were forced to do little ones.

At the end of the day, you’re going to have to be charging people and convicting people to restore credibility. You’re going to have to conduct a tax gap analysis. Why don’t you simply jump over all the hurdles and get there so that you don’t have this problem over you? But they don’t see it as a problem. They see it as interference in their area and their self-contained group.

It is, without a doubt, the worst department I’ve ever encountered in government, bar none.

My experience has been the ministers are very defensive and defend the department exclusively.