By Sen. Percy Downe (guest opinion)
Do you know just how much money our country is losing to overseas tax evasion? The Office of the Parliamentary Budget Officer doesn’t. Apparently, neither does our government. Most of us pay high taxes and in turn, expect services from the Government of Canada, but in recent years, many of these services have been reduced, or completely cut. Simply put, if overseas tax cheats don’t pay their fair share of taxes, the rest of us have to pay more to make up the shortfall or face cuts to the benefits and services on which we rely, for example reducing those benefits and services for veterans and their families and raising the eligibility for Old Age Security Pension from 65 to 67 years.
Given the magnitude of this problem, I asked the Parliamentary Budget Office (PBO) over two years ago to examine the economic impact of overseas tax evasion. Then Parliamentary Budget Officer Kevin Page concluded that the best way to do this would be to determine the size of the tax gap, a job he was confident his office could undertake if they were given the necessary data by the Canada Revenue Agency (CRA). An analysis of the difference between what is owed in taxes and what is actually collected would provide a means of measuring not only the performance of the Revenue Agency, but would also determine just how massive a problem overseas tax evasion has become; however, the CRA has blocked any attempt by the PBO to acquire the necessary data.
CRA’s justification for this lack of co-operation on measuring the tax gap may be partly found in their attitude toward the tax gap itself: they simply do not understand the value of it. This analysis would disclose the amount of dollars owed but not paid by overseas tax cheats to the federal government, an amount which would no doubt astound Canadians and could further expose the Agency’s failing efforts to combat overseas tax evasion.
Canada’s Revenue Agency does not have much company in its dismissive attitude toward calculating the tax gap. The United States, the United Kingdom, France, Turkey, Sweden and other countries all produce regular estimates of their tax gap, seeing it as, in the words of the United States Internal Revenue Service as a means of enabling government to "make better decisions about tax policy and the allocation of resources for tax administration."
This is not an endeavour these agencies take lightly. Her Majesty's Revenue and Customs (HMRC), the United Kingdom's (UK) equivalent of the CRA, produces yearly estimates of their tax gap, calling them a "foundation for HMRC's strategy", which enables the agency to measure the effectiveness of its programs. In fact, it even looks to other countries' estimates of their respective tax gaps for other policies that might be worth adopting by the UK. Similarly, the Swedish National Tax Agency uses their estimate as a means of risk management, helping to determine the best allocation of their Agency's resources.
Another point bears remembering as well. The PBO did not request that the CRA produce an estimate of the tax gap, but rather, offered to do the work themselves, and showed the Agency how it could be done while respecting the confidentiality of tax records. They even offered to cover the cost of the study. But the CRA remains unmoved. Not only does the government not want to estimate the tax gap, it doesn't want anyone else to try to do it either.
Given this government’s past response on this and other files and its attitude toward data ranging from scientific research to the long-form census, this uncooperative spirit is hardly surprising. But regardless, the fact remains that the CRA has a legal obligation to cooperate with the Parliamentary Budget Officer in fulfilling his mandate to “provide independent analysis to Parliament on the state of the nation's finances (…) and upon request from a committee or parliamentarian, to estimate the financial cost of any proposal for matters over which Parliament has jurisdiction.”
The current state of affairs suggests an obvious failure on the part of the CRA to come to terms with a problem that is costing Canadians untold lost dollars in tax revenue. As a result, we risk an erosion of confidence in our taxation system at a time when every dollar counts. If the Government will not take this problem seriously, then it is time for the Parliamentary Budget Officer to exercise the full authority of his office and take the Canada Revenue Agency to court. Simply put, tax fairness, like justice, must be seen to be done and we’re running out of options.
- Percy Downe is a Senator from Charlottetown.