Hon. Elizabeth Marshall: Congratulations on your appointment, Your Honour. It’s wonderful to see you in the chair.

Honourable senators, I rise today to speak as a critic of Senator Downe’s Bill S-258, An Act to amend the Canada Revenue Agency Act (reporting on unpaid income tax), but I must confess that there is not much to be critical of with this bill.

As most of you will know, Senator Downe has been working on this issue for several years. He tabled his first bill in April 2015; it was Bill S-226. That bill died on the Order Paper when the 2015 election was called, but Senator Downe reintroduced the legislation as Bill S-243 in 2018. That bill was passed by this chamber with some minor amendments at committee, and then made it all the way to second reading in the House of Commons. I am hoping this bill makes it all the way through both houses.

Like its earlier iterations, Bill S-258 amends the Canada Revenue Agency Act to do three things: First, it will require the Canada Revenue Agency to list all convictions for tax evasion in the annual report it submits to the Minister of National Revenue. This would include convictions with respect to international tax evasion.

Second, Bill S-258 requires the agency to provide statistics on the tax gap once every three years.

Third, the bill will require the minister to provide data on the tax gap to the Parliamentary Budget Officer.

The value of these amendments is quite evident, but allow me to briefly explain the importance of what this bill will do — starting with the tax gap.

Quite simply, the tax gap is the difference between what the government should be collecting in taxes and what is actually collected. This is not an exact science because the tax gap exists, in part, due to income, assets and economic activities which are intentionally hidden, or as a result of errors which can be difficult to detect. But it is possible to establish an approximate tax gap range using one of two methodologies.

Since the tax gap is an estimate, it is presented as a range; for example, in 2022, the Canada Revenue Agency estimated a total gross tax gap of between $35 billion to $40 billion, or about 9% of federal revenues. The Canada Revenue Agency projected that, through collection efforts, they would be able to recoup $17 billion of that, leaving a net tax gap of $23 billion.

Colleagues, measuring this number is critical because it gives us a much-needed benchmark. Without it, we have no clear picture of how well our tax system is working, and we have no way to measure the effectiveness of our compliance and enforcement efforts. We are essentially flying blind.

While simply measuring the tax gap solves nothing on its own, it is very much like taking a reading of someone’s vital signs. It reveals if something is wrong, and whether it is getting better or worse. If your tax gap is high, you know you have a problem. If your tax gap is rising, your problem is becoming worse. But if your tax gap is dropping, then you’re doing something right.

This information is a vital tool. It assists the government in improving revenue collection, evaluating tax policies, ensuring fairness in the tax system, allocating resources effectively and developing strategies to promote compliance. Yet until recently, we were not measuring the tax gap.

This began to change in 2016, when the Canada Revenue Agency began publishing reports on various components of the federal tax gaps, including estimates and their underlying methodologies. In 2022, the Canada Revenue Agency published the Overall federal tax gap report: Estimates and key findings for non-compliance, tax years 2014-2018 — its first-ever overall tax gap report — which looked at all sources of federal government taxation. This work is valuable and appreciated, but it remains deficient for a number of reasons.

First, there is no statutory requirement for the Canada Revenue Agency to continue this work. Because of the importance of the information to parliamentarians, it needs to be required by law. It needs to be regular in its occurrence so we can see over time if we are making progress. Bill S-258 addresses these shortcomings by mandating that the tax gap report is provided to parliamentarians every three years.

Second, there is currently no obligation for the Canada Revenue Agency to provide tax gap data to the Parliamentary Budget Officer. Without this information, there is a serious gap in accountability because the Parliamentary Budget Officer is unable to do his own assessment and verification of the Canada Revenue Agency’s tax gap estimate. Bill S-258 addresses this deficiency as well.

Third, although the Canada Revenue Agency publicly releases a list of some convictions for tax evasion, this list is not exhaustive and includes little information on international tax evasion cases. Without this information, the Canada Revenue Agency faces diminished public accountability regarding their efforts to crack down on offshore tax evasion. Bill S-258 would address this by requiring the Government of Canada to disclose all convictions for overseas tax evasion.

At its heart, this bill is one step in the fight against tax evasion, but it is an important step because tax evasion can have a significant impact on the public’s confidence in the fairness of the tax system. When individuals or corporations evade taxes, they are avoiding their obligation to contribute their fair share to the funding of public services and programs that benefit our society as a whole. This creates a sense of unfairness and resentment among those who do pay their taxes and can create the perception that the system is rigged in favour of those who are wealthy and powerful. It erodes public confidence in the government’s ability to enforce the tax laws fairly and to ensure that everyone is treated equally under the law.

Furthermore, tax evasion has practical consequences such as the loss of revenue for the government, which can lead to cuts in public services and programs or an increase in the tax burden on those who do pay their taxes. This can further exacerbate feelings of unfairness and injustice and lead to a breakdown in the social contract between citizens and the government.

Bill S-258 does not solve all of these problems, but it is a necessary step in the right direction. It will close a gap in important information that parliamentarians need to do their jobs properly. It will help to increase public accountability for the Canada Revenue Agency. It will help incentivize better enforcement and better public policy. It will help bolster voluntary compliance through greater public awareness, and it will strengthen public confidence in the fairness of our tax system.

Honourable senators, there is no perfect tax system, but we can make ours better and stronger by passing Bill S-258. I encourage you to support this bill so it can go to committee for further study. Thank you.

(On motion of Senator Martin, debate adjourned.)

On the Order:

Resuming debate on the motion of the Honourable Senator McCallum, seconded by the Honourable Senator Boisvenu, for the second reading of Bill C-226, An Act respecting the development of a national strategy to assess, prevent and address environmental racism and to advance environmental justice.