The time has come for the Parliamentary Budget Officer (PBO) to take the Canada Revenue Agency (CRA) to court in order to compel them to provide information necessary to calculate the tax gap, the difference between what is owed in taxes and what has actually been collected.
The CRA is required, under the Parliament of Canada Act to supply the PBO with:
free and timely access to any financial or economic data in the possession of the department that are required for the performance of (the PBO’s) mandate.
By refusing to supply the information the PBO has requested, the Canada Revenue Agency is in violation of both the spirit and the letter of the law. It is important to note that the PBO is only requesting raw data, not the personal information of any taxpayer.
Other countries regard such an estimate of the gap between taxes owed and taxes collected as a valuable tool in measuring the scale of the problem of uncollected revenues. It also serves as a benchmark against which the effectiveness of both a nation’s tax policies as well as its revenue agency, in carrying out those policies, can be measured. The United States, the United Kingdom, Sweden, Denmark and Australia; all these countries see the value of the exercise. It was with this in mind that five years ago, the PBO approached this country’s revenue agency to assist him in estimating Canada’s tax gap. Unfortunately, the CRA provided no such assistance.
There is a long established method of resolving such disputes, it is called the court system. As it stands, the Parliamentary Budget Officer has little choice but to pursue legal action against the Canada Revenue Agency in order to compel them to provide the information he requires—and for which CRA is obliged to provide him—in order to execute his duty to Parliament. All this time and expense can be avoided, of course, if Prime Minister Trudeau directs his Revenue Minister to have the Agency provide the information to the Parliamentary Budget Officer.
Regrettably, years of stonewalling by the Canada Revenue Agency have prevented the PBO from making any progress in measuring the tax gap. Canadians deserve to know what citizens of other countries already know, that is, the size of their country’s tax gap, and how much money the CRA should be collecting. The Conference Board of Canada in their February 2017 report estimated the tax gap to be up to $47 billion. If the CRA collected that money, Canada would have no deficit, taxes could be reduced and new programs funded.
The reason an independent analysis is required, separate and apart from any report prepared by the CRA, is quite simple: given their recent track record, Canadians cannot trust the Canada Revenue Agency.
For example, a recent investigation by the Auditor General of the agency’s call centres revealed that their claimed 90% rate of successfully connected calls (to an agent or the automated help line) was only accomplished by hanging up on 29 million calls. When that factor is taken into account, the “success” rate drops to a staggering 36%.
Similarly, the revenue minister has claimed that “we have invested nearly $1 billion over the past two years” to fight tax evasion. However, the Minister neglects to mention the amount is to be paid out over six years and that, as of March 31st 2018, less than $40 million has actually been spent. Another of their boasts regards a “full-time dedicated unit focused on offshore non-compliance.” What they do not announce is that the much-touted International, Large Business and Investigations Branch was merely formed by reorganizing existing parts of CRA, and specifically “did not necessitate an increase or transfer of resources”.
Even praise from ostensible outside sources must be regarded with suspicion, as was the case earlier this year when a series of media articles describing the CRA’s tough stance on tax evasion turned out to have been commissioned by the agency itself, at a cost of $288,497.36 — money that could have been used to actually fight tax evasion.
There are many hard-working, conscientious employees at CRA, and it must be very discouraging for them to have a management team that operates in this consistently misleading manner.
Allowing the Parliamentary Budget Officer to provide an independent estimate of the tax gap is long overdue, and if the Canada Revenue Agency will not provide the necessary data, it must be compelled to do so.
Senator Percy E. Downe is a senator representing Prince Edward Island. He is requesting the PBO to take the CRA to court compelling them to obey the Parliament of Canada Act. Senator Downe has also recently tabled a bill in the Senate requiring CRA to report on the size of the tax gap.
This article appeared in the December 18, 2017 edition of The Province.