April 4th, 2016

Senator Introduces Fairness for All Canadian Taxpayers Act (FACT Act)

In the ongoing battle against overseas tax evasion, Charlottetown Senator Percy Downe will introduce a Bill on April 13th in the Senate requiring the Government of Canada to measure the tax gap (the difference between what tax revenue the Canada Revenue Agency (CRA) is owed and what it actually collects).

In the 2016 Budget, the federal government committed $444.4 million over five years for the Canada Revenue Agency (CRA) “to enhance its efforts to crack down on tax evasion and combat tax avoidance”. Hopefully some of that money will be targeted at overseas tax evasion. However, the CRA’s continuing refusal to measure the tax gap means they do not even have an estimate of the amount of money lost to Canadians through overseas tax evasion. Analysis of the tax gap would provide an important measure, both of the scale of the problem of overseas tax evasion, and the effectiveness of CRA’s efforts to combat it.

“Measuring the tax gap will assist the government in determining if the Canada Revenue Agency needs $444.4 million or $777.7 million to fight overseas tax evasion,”, said Downe. “Without the tax gap information, they are only guessing at the resources they require.”

“In the 2015 Election, the Liberal Party platform contained a commitment to ‘Directing CRA to immediately begin an analysis and stronger enforcement of tax evasion, or what the OECD calls the tax gap ’. But the CRA still refuses to commit to such an analysis, despite the change in government. The time has come for the CRA and Canada to join countries like the United States, the United Kingdom, Denmark, and Mexico and measure the tax gap,” stated Downe.

“The Prime Minister’s mandate letter to the Minister of National Revenue directs the minister to commit ‘additional resources to help the CRA crack down on tax evaders and work with international partners to adopt strategies to combat tax avoidance’ is a positive sign, one reinforced by the recent federal budget.” The Liberal Party platform for the 2015 Election campaign also included this commitment to “measure our results and encourage innovation to continuously improve the services government provides to Canadians.”Calculation of the tax gap is the very embodiment of that promise. Not only would it serve to focus the attention of Canadians on the nature and scale of the problem of overseas tax evasion, but going forward it would serve as a yardstick by which the effectiveness of the CRA and its policies can be measured.

Senator Downe’s work on the tax gap goes back to October of 2012, when he wrote the then Parliamentary Budget Officer (PBO) asking him to investigate the economic impact of overseas tax evasion. That investigation evolved into an effort to determine the tax gap. After diligent effort, the PBO determined that it is indeed possible to provide an estimate of the gap, and subsequently approached the CRA to secure the Agency’s cooperation in this endeavour. Unfortunately, the intervening years have not seen any cooperation from the CRA, as it continues to demonstrate a reluctance to let the PBO’s inquiry proceed.

Sen. Downe’s Bill would amend the Canada Revenue Agency Act to require the Canada Revenue Agency to report on all convictions for tax evasion, including a separate report on overseas tax evasion, in the annual report it submits to the Minister for tabling in Parliament. It requires the Minister of National Revenue to report to Parliament annually on the “tax gap”, defined in the Bill as the difference between what taxes should have been assessed under the Income Tax Act and what is actually collected.

For further information:
Senator Percy Downe: 613-943-8107
Or toll free at 1-800-267-7362