Monday, November 5, 2012
Senator Writes Prime Minister Harper to Appoint Senior Public Servant
to Lead Revenue Agency
Charlottetown Senator Percy Downe has written Prime Minister Stephen Harper urging him to appoint an experienced public servant with outstanding leadership skills who will use their expertise to clean up the obvious problems at the Canada Revenue Agency (CRA) with regard to its handling of overseas tax evasion.
“This newly created vacancy for a Commissioner and Chief Executive Officer at CRA provides a timely opportunity for you to make an appointment that would elevate the position of Commissioner and Chief Executive Officer of the Canada Revenue Agency to the importance it deserves,” said Downe.
By this Government’s own admission, they have ‘assessed’ more than $4 billion in taxes owed on money in overseas tax havens, but they have actually collected very little and cannot confirm how much more hidden money might still be out there.
Recent scandals over the Agency’s response to overseas tax evasion linked to accounts in Liechtenstein and Switzerland point to serious management problems at CRA, and an internal audit performed by the Agency in 2010 suggested that CRA is not pursuing serious cases of overseas tax evasion because of insufficient resources.
The fact that the CRA may be abandoning serious cases simply because they are too difficult to pursue speaks to either a lack of leadership or a lack of resources at the Agency. If it is simply a matter of resources, past experience indicates that the problem can be easily solved. Internal CRA documents obtained through an Access to Information request revealed that an infusion of $30 million from the February 2005 Budget to counter Aggressive International Tax Planning (AITP), yielded a total fiscal impact in excess of $2.5 billion in just four years.
If, on the other hand, the issue is one of leadership, then the current vacancy as Head of CRA provides Prime Minister Harper not only the opportunity, but the means to make a senior appointment of an individual with strong management skills who would help address the growing problem of overseas tax evasion.
“By choosing an experienced public servant with outstanding leadership skills who will use their expertise to clean up the obvious problems at CRA and ensure that our tax laws are fully enforced, you can guarantee a just and effective taxation system for all Canadians,” wrote Downe. “Those Canadians, who, as you well know, work hard, pay their taxes and play by the rules, deserve nothing less.”
For further information:
Senator Percy Downe: 613-943-8107
Or toll free at 1-800-267-7362
www.sen.parl.gc.ca/pdowne
November 5, 2012
Right Honourable Stephen Harper, PC, MP
Prime Minister of Canada
Langevin Building
80 Wellington Street
Ottawa ON K1A 0A2
Dear Prime Minister:
I am writing you with regard to the Canada Revenue Agency (CRA), particularly as it relates to the serious issue of overseas tax evasion. I note with interest your intention to replace the Commissioner and Chief Executive Officer of the Canada Revenue Agency. This provides an excellent opportunity to send a clear message, both to the Agency and to Canadians in general, that there is a renewed focus on making sure Canadians hiding their money in overseas tax havens pay their fair share of taxes.
This newly created vacancy for a Commissioner and Chief Executive Officer at CRA provides a timely opportunity for you to make an appointment that would elevate the position of Commissioner and Chief Executive Officer of the Canada Revenue Agency to the importance it deserves.
Recent scandals over the Agency’s response to overseas tax evasion linked to accounts in Liechtenstein and Switzerland point to serious management problems at CRA, and an internal audit performed by the Agency in 2010 suggested that CRA is not pursuing serious cases of overseas tax evasion because of insufficient resources.
The fact that the CRA may be abandoning serious cases simply because they are too difficult to pursue speaks to either a lack of leadership or a lack of resources at the Agency. If it is simply a matter of resources, past experience indicates that the problem can be easily solved. Internal CRA documents obtained through an Access to Information request revealed that an infusion of $30 million from the February 2005 Budget to counter Aggressive International Tax Planning (AITP), yielded a total fiscal impact in excess of $2.5 billion in just four years.
If, on the other hand, the issue is one of leadership, then the current vacancy as Head of CRA provides you with not only the opportunity, but the means to make a senior appointment of an individual with strong management skills who would help address the growing problem of overseas tax evasion. In making the right appointment, you can ensure that our tax laws are fully enforced and guarantee a just and effective taxation system for all Canadians.
By your Government’s own admission, they have ‘assessed’ more than $4 billion in taxes owed on money in overseas tax havens, but they have actually collected very little and cannot confirm how much more hidden money might still be out there.
For several years now, I have been concerned that a wealthy few avoid paying their fair share of taxes by hiding their money in secret overseas bank accounts. For example, there is the case of Liechtenstein, where in 2007, the Government of Canada was provided with a list of 106 Canadians with secret accounts totaling over $100 million in a bank in Liechtenstein. It was part of a larger list of clients taken from the bank by a former employee and later acquired by the Government of Germany, which subsequently shared the information with countries whose citizens were on the list.
Among those countries, Australia stands out for its decisive action against overseas tax evasion. Even before the Liechtenstein revelations, the Government of Australia had instituted an initiative called Project Wickenby - a task force comprising eight government agencies with a mandate to “protect the integrity of Australia's financial and regulatory systems” by cracking down of Australians’ illegal use of tax havens.
The results have been impressive. Wickenby was expected to recover approximately $AUS500 million in wrongfully evaded tax revenue by the summer of this year. Not only was this goal met, but as of June 30th, 2012, the Australian Government was able to recover just over $AUS660 million. That’s almost $675 million in Canadian currency. On top of that, 67 people were charged, with 26 convictions. And the process is by no means complete.
Unfortunately, Canada’s record in combating overseas tax evasion is less encouraging. Returning to the example of Liechtenstein, as of April of this year, the Canada Revenue Agency (CRA) claimed to have assessed just $16.5 million dollars owing in back taxes, interest and penalties on the money hidden by Canadians in Liechtenstein. Given that the total amount of money hidden away was over $100 million – with $12 million in one account alone - this is a very small amount. Smaller still is the amount they have actually collected: a little over $5 million, or less than one-third of what was assessed.
And amid the talk of interest and penalties, another fact stands out: not one penny has been assessed in fines. That is because not one charge has been laid. By its own admission, since CRA received this information five and a half years ago, not one of these Canadians who have hidden their money abroad to avoid paying taxes in Canada has stood before a judge.
This is troubling for two reasons.
The first is obvious: the simple principle of fairness. A visit to CRA’s website reveals page after page of convictions for domestic tax evasion and fraud. Seeing the discrepancy in punishment for domestic and overseas tax evasion could lead Canadians to question whether a double standard exists.
The second reason is the need to prevent, or deter, tax evasion in the future. In taxes as in other matters, justice must be seen to be done. Again, the Australian experience in exemplary:
A recent report by the Australian Transaction Reports and Analysis Centre (AUSTRAC) shows that from 2007-08 to 2010-11 there was a $12 billion decrease in fund flows to the major jurisdictions where Project Wickenby has focused attention. . . AUSTRAC figures also show a decline in funds flowing to various countries, including a: 50% decline to Vanuatu ; 80% decline to Liechtenstein ; 22% decline to Switzerland.
This is how dedicated enforcement of tax laws pay off. If a prospective tax evader believes he will be caught and prosecuted, he will not attempt to hide his money. Unfortunately, the imbalance between the prosecution of domestic versus overseas tax evasion leads to worries that the CRA is not pursuing overseas tax evasion with the same diligence it applies to its domestic equivalent.
Such worries are not eased by the October 2010 internal audit I referred to earlier by the Canada Revenue Agency which raised a troubling state of affairs:
“Cases that could potentially represent significant criminal non-compliance can be rejected by a specific TSO enforcement group because of limited resources or other workload pressures. . . (O)ffices are choosing smaller cases of a lower dollar value that do not necessarily represent the greatest risk.” (Enforcement and Disclosures Programs Evaluation, Corporate Audit and Evaluation Branch, Canada Revenue Agency, October 2010)
By choosing an experienced public servant with outstanding leadership skills who will use their expertise to clean up the obvious problems at CRA and ensure that our tax laws are fully enforced, you can guarantee a just and effective taxation system for all Canadians.
Those Canadians, who, as you well know, work hard, pay their taxes and play by the rules, deserve nothing less.
Sincerely,
Original signed by
Percy E. Downe
Senator |
