March 25, 2013

Budget 2013: Cuts to Canada Revenue Agency Casts Doubt on
Government’s Commitment to Address Overseas Tax Evasion

Charlottetown Senator Percy Downe is disappointed that the Government of Canada has decided to handicap the Canada Revenue Agency by cutting millions from its budget and questions how the Agency can effectively address the issue of overseas tax evasion when the 2013 Budget calls for cuts to the Canada Revenue Agency of $19 million for this year alone – almost tripling to $58 million next year.

“The reality is, Minister Jim Flaherty could significantly reduce our mounting deficit without cutting any programs or jobs. The question now is, will he?” asked Downe before the Government dropped the budget yesterday. Unfortunately, high hopes were dashed for what could have been one of the most lucrative things this Government could do to collect the monies owed from wealthy Canadians and businesses who hide billions of dollars in overseas tax havens.

“It would have been very encouraging to see the Canadian Government take this issue seriously and finally commit the resources essential to combat this massive problem. Unfortunately, it appears they are trying to fight this on the cheap. Canadians wonder if this was a last minute inclusion in response to the mounting public anger over the actions of a wealthy few who won’t pay their fair share,” said Downe.

For his part, Downe does not understand why the Government is not committing more financial resources to combat tax evasion. Internal Canada Revenue Agency documents he was able to obtain through an Access to Information Request reveal that an infusion of $30 million dollars from the February 2005 budget to counter Aggressive International Tax Planning yielded a total fiscal impact in excess of $2.5 billion dollars in just four years. Rather than following that proven example, the Government has chosen to cut much needed resources.

“These cuts cast doubt about how serious this Government is about addressing the issue. In all, almost $260 million will be taken away from the Agency, at a time when it will be called upon to generate some $2.4 billion in additional revenue,” continued Downe.

The fact that the Canada Revenue Agency is being asked to do more with less means that the Agency must be even more closely monitored going forward to ensure that tough talk finally turns into real action. The last three Revenue Ministers - Jean-Pierre Blackburn, Keith Ashfield and Gail Shea - have failed to show any real leadership on overseas tax evasion. Downe pointed to the Agency’s stonewalling of Parliamentary Budget Officer Kevin Page as the most recent example of the unwillingness to do anything to tackle the problem of overseas tax evasion.

In response to Downe’s request that Parliamentary Budget Officer Kevin Page investigate what has come to be called the “tax gap” (the difference between the tax revenue the Government ought to be able to collect and what is actually collected), Page made repeated attempts to obtain data from the Canada Revenue Agency, but the Agency refused to provide the information.

“It would appear that Minister Flaherty is of the view that fighting overseas tax evasion doesn’t require any significant commitment of money from the Government. In that case, he can start by instructing the Agency to provide the information requested by the Parliamentary Budget Officer so that the size of the tax gap can be calculated. Once Canadians, and indeed our own Government, become aware of just how many billions of dollars in taxes are owed but not collected, we will fully understand the size of the problem and the need for additional resources for the Canada Revenue Agency to solve it,” concluded Downe.

For further information:
Senator Percy Downe: 613-943-8107
Or toll free at 1-800-267-7362   
www.sen.parl.gc.ca/pdowne