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November 25, 2014

Time for Parliamentary Budget Officer to Exercise Mandate Regarding Tax Gap

Charlottetown Senator Percy Downe has called upon the Parliamentary Budget Officer (PBO) to “exercise the full authority” of his office and take the Canada Revenue Agency (CRA) to court to obtain information necessary for the PBO to perform its analysis of Canada’s tax gap. An analysis of the difference between what is owed in taxes and what is actually collected would provide a means of measuring the performance of the Agency, as well as determine just how many are not paying their fair share.

The legislation establishing the Parliamentary Budget Office clearly states that the PBO is entitled to “free and timely access to any financial or economic data in the possession of the department that are required for the performance of his or her mandate”.

“Over two years ago, on October 18th 2012, I asked the PBO to examine the economic impact of overseas tax evasion and then Parliamentary Budget Officer Kevin Page advised that given the right data by the CRA, they could determine the size of the tax gap,” said Downe. “Since then, the CRA has blocked any attempt by the PBO to acquire the data necessary for his office to come up with an estimate of its own.”

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 “a helpful guide to the scale of tax compliance and to the persisting sources of low compliance.”

“Regardless of whether or not the CRA thinks estimating the tax gap is a worthwhile exercise, the Agency cannot just pick and choose what information they provide to the Parliamentary Budget Officer,” said Downe. “They are obliged by law to provide what is requested. And if they refuse to live up to that obligation, the PBO has no other alternative then to take them to court.”

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


November 20, 2014

Jean-Denis Fréchette
Parliamentary Budget Officer
50 O’Connor Street, Room: 347
Ottawa, ON  K1A 0A9

Dear Mr. Fréchette:

As you are no doubt aware, October 2014 marks the second anniversary of my request to your office to examine the financial cost of the Government of Canada’s failure to effectively combat the problem of overseas tax evasion. Subsequently, this request evolved into an inquiry to estimate Canada’s “tax gap”.

Since that original request, unfortunately, there has been very little to show for the efforts of your office and mine. What followed has been two years of stonewalling and delaying tactics on the part of the Canada Revenue Agency. Their foot-dragging only serves to mask what can only be perceived as an adamant refusal to cooperate in any way with an exercise which may reflect poorly on the Agency and its efforts.

Other jurisdictions are not so concerned about criticism, and regard calculating the tax gap as a credible and worthwhile exercise. The United States’ Internal Revenue Service, for example, regards the tax gap as a “helpful guide to the scale of tax compliance and to the persisting sources of low compliance.” For its part, the government of the United Kingdom uses such calculations “to identify trends in individuals’ and companies’ compliance within the letter and the spirit of the tax law.” And they are hardly alone: Sweden, Denmark, France, and a host of other countries see value in the study of the tax gap. It provides a means of measuring the performance of a revenue agency, as well as demonstrating to a society how many of its members aren’t paying their fair share. There is no legitimate reason why the Canada Revenue Agency cannot perform this function, much less prevent others from doing it for them.

If the Canada Revenue Agency was serious about lifting a finger to assist your investigation, they would have demonstrated it by now. Clearly, the lack of co-operation from the Canada Revenue Agency is getting us nowhere, and it is time to pursue alternative courses of action.

Therefore, I would ask you to recognize that the Canada Revenue Agency is stonewalling you, exercise the full authority of your office, and take the Canada Revenue Agency to court to compel them to meet their legal obligation to disclose the information you have requested.

Sincerely,

Original Signed by

Percy E. Downe
Senator

 
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