Hon. Percy E. Downe moved second reading of Bill S-258, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax).

He said: Honourable senators, you will note that this is the third time I have tabled the same private member’s bill, the fairness for all Canadian taxpayers act, requiring the Government of Canada to disclose all convictions for overseas tax evasion and to measure the tax gap — the difference between what taxes should have been collected and what is actually collected. It would also require the Canada Revenue Agency to provide the Parliamentary Budget Officer with data it has collected on the tax gap, as well as any additional data the PBO considers important so that he can prepare his own independent analysis of the tax gap.

The second and most recent time, this bill passed the Senate but not the House of Commons. Hopefully, the third time is the charm.

Let me begin, as I always do, with this disclaimer: It is not illegal to have a bank account overseas, but it is illegal not to report proceeds from those accounts to the Canada Revenue Agency. Colleagues, it used to be that the Canada Revenue Agency didn’t attract a great deal of attention, either from the public or from the government. As the one branch of government counted upon to turn a profit, there has always been a temptation to simply let it go about its business — if it’s not broken, don’t fix it.

However, that confidence has been eroded as we see story after story about overseas tax evasion with no punishment and, unfortunately, little or no recovery of money, compounded by the repeated responses of the CRA after every public disclosure. For example, “They are working hard to catch overseas tax cheats,” they tell us. “They take it very seriously,” they tell us. They’ve identified, as opposed to collected, X amount of money, and so on. Unfortunately, these comments from CRA belie the fact that their efforts and results are disappointing to the extreme.

One of many such examples is the Panama Papers, which were released in 2016. In the seven years since the release of those papers and the public disclosure, which identified hundreds of Canadians holding accounts in one law firm in Panama, other countries with citizens identified in the publicly released documents as having those accounts hidden in Panama collected over $1.3 billion in taxes that were owing to them.

As of 2021, the last year for which information is available, Australia has recovered $138 million; Ecuador, $84 million; Spain, $166 million; and even Iceland, a country of 340,000 people, has recovered $25 million. But for all the hundreds of accounts and dozens of audits, Canada hasn’t announced the recovery of a nickel. Zero recovery.

The CRA has claimed to have assessed over $16 million owing, but as I said, assessed isn’t collected, and not one person has been charged, much less convicted, of overseas tax evasion. Other countries’ individuals have been charged and convicted, in addition to having to pay back the funds.

In October 2012, almost 11 years ago, I wrote the then Parliamentary Budget Officer, asking him to investigate the economic impact of overseas tax evasion. At his suggestion, that investigation evolved into an effort to determine the tax gap: the difference between what should be collected by our revenue agency and what they actually collect. The PBO determined that it is indeed possible to provide an estimate of the gap, particularly given that so many other countries are doing it. Subsequently, it approached the CRA to secure the agency’s cooperation in that effort.

Colleagues, the CRA refused to cooperate. We know why when we realize the tax gap not only measures what should be collected but also how effective — or, in this case, ineffective — our national revenue agency is in their duty and responsibility to collect money owed to the Government of Canada. I am sure that the exposure, through a tax gap analysis, of the wholly inadequate job the CRA is doing in fighting overseas tax evasion was a major factor in the agency’s refusal to cooperate with the PBO.

But even without the cooperation of the CRA, the PBO was able to come to his own conclusion about the tax gap. He testified before a Senate committee in March 2020, stating that based on his own analysis:

I am convinced . . . having worked both at the CRA and been PBO for a year and a half now, that there are hundreds of millions, if not billions, of dollars in taxes that go undeclared, unreported and that escape Canadian tax authorities, probably on an annual basis due to the international transactions that take place.

For its part, the well-respected Conference Board of Canada published a report six years ago titled Canadian Tax Avoidance and Examining the Potential Tax Gap. They concluded that up to $47 billion worth of taxes are not being collected by the Government of Canada.

The Canada Revenue Agency maintains on its website a list of press releases about Canadians convicted of offences related to tax evasion. It does so, in its own words:

. . . to maintain confidence in the integrity of the self-assessment system, and to increase compliance with the law through the deterrent effect of such publicity.

If you look at the list, as I did recently, you will find a wide range of people from coast to coast, all caught and all punished, almost all for domestic tax evasion. But if you hide your money overseas, your chances of getting caught are very low, whereas if you cheat on your taxes domestically, you are likely to be caught, fined and jailed in some cases. To that end, of all the notices — and there were 105 when I looked — going back to 2017, only three were convictions for what one might call overseas tax evasion and none were for particularly high amounts. Most of those convictions were through proper insurance action.

I should note that the recent years have not been without some measure of success. The 2015 election platform of the Liberal Party 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.”

The agency, for all its past reluctance, has been forced, due to that promise, to begin to release a series of reports on the gap, starting in 2016, with the most recent one released last summer, which makes passing reference to overseas tax evasion.

However, Canada needs a series of studies over time to gauge the effectiveness of the CRA to see what is working and what needs improving. The decision on whether to pursue that series should not be left to the CRA alone; given their refusal to cooperate with the PBO, it should be required by legislation, which this bill would provide.

I want to emphasize that a requirement for the CRA to report on overseas tax evasion and the broader tax gap is not the result of mere curiosity. Other countries — the United States, the United Kingdom, Turkey, Sweden and even the State of California — measure their tax gaps and have found it to be a valuable policy-making tool. They all agree that the money hidden overseas must come home, and they need continued tax gap information to identify the dollar amounts involved and to help bring that money back.

In Canada, as I stated, there is no risk to hiding your money overseas because your chances of being charged, let alone convicted, range from slim to none. The hundreds of millions, if not billions, of dollars identified by the Parliamentary Budget Officer will not, as if by magic, solve our financial problems, but if we collected even a portion of that, we could reduce the deficit and fund various programs. We all know that every time a new policy is suggested in Canada, the question is often asked, “How will you pay for it?” It is a wonderful suggestion about how it will be paid for. The billions of dollars hidden overseas would answer that.

Various taxes could be lowered as well.

It is undeniable that a significant amount of money is lost to this country through overseas tax evasion, but beyond that is the simple fact that it is grossly unfair. Those of us who are playing by the rules and paying our taxes are being deceived by other Canadians who are skipping the system and hiding their money overseas.

The failure to collect taxes owed undermines confidence that everyone is being treated equally. If we are all in this together, then we all pay taxes. Otherwise, there is special treatment for some Canadians with the resources to hide their money, while the rest of us must pay more to make up the shortfall.

Colleagues, before I wrap up, I want to express my thanks to those senators who delivered speeches in favour of this bill when I last introduced it. The bill before the Senate today is identical to that previous bill. The support from Senator Paul MacIntyre, who has since retired, Senator Bovey, Senator Galvez and Senator McPhedran is much appreciated. I thank them for that support. Indeed, I thank all senators who passed this bill in the Senate last time. We hope for common sense to grip the House of Commons this time so they will pass it as well.

Thank you, colleagues.

(On motion of Senator Martin, debate adjourned.)