Canada can now quantify its tax evasion problem
Since 2012, the Parliamentary Budget Officer has been trying to fulfil my request to measure the tax gap — the difference between what is owed in taxes and what has been collected — but has been stonewalled by the Canada Revenue Agency. The announcement that the CRA has finally provided that information is welcome, if belated, news. It is disappointing, however, that it took so long and only happened because the PBO threatened to take the agency to court.
The PBO now has what he needs to conduct his study. That said, why should the PBO produce an estimate of the tax gap when the CRA has committed to conducting its own study and has released three minor reports on the subject since 2016? The reason an independent analysis is required is simple: the agency has been repeatedly caught trying to mislead Canadians. The result is the lack of credibility facing any sort of CRA-produced tax gap report.
Here are a few recent examples from a long list of the CRA misleading Canadians:
Call centres
The Claim: The Auditor General’s recent report on CRA call centres cited the agency’s claim that 90 per cent of calls were successfully connected.
The Reality: According to that same report, it was revealed that the CRA achieved this success rate by blocking 28.9 million of the 53.5 million calls received and excluded the blocked calls from its calculations. When blocked calls and other factors were considered, “the agency’s overall success rate was 36 per cent.”
Disability tax credit
The Claim: Historically, 80 per cent of applications for benefit by diabetics were approved by the CRA. However, in recent months, almost all previously approved claims have been rejected. Meanwhile, the revenue agency publicly claimed that there has been no change to the eligibility criteria.
The Reality: Documents obtained by Diabetes Canada show a CRA May 2, 2017, email modifying the “variable for (life-sustaining therapy) clarification verses with a new variable.” In effect, diabetics who previously qualified for the disability tax credit were disallowed. When confronted with the evidence of their misleading statement, the CRA backed down.
Sponsored content
The Claim: In February and March of 2017, articles appeared in newspapers and online across Canada extolling the CRA’s work. Bearing titles like, Federal programs in place to address offshore tax avoidance and evasion, and, How Canada is cracking down on offshore tax evasion and aggressive tax avoidance, it was likely the best press the agency had ever received.
The Reality: It was subsequently revealed that CRA — operating under the premise that if you can’t earn good press, buy it — paid almost $300,000 for this positive “sponsored content” in six print and digital newspapers.
Billion-dollar investment
The Claim: A number of individuals, from CRA spokespersons to the revenue minister herself, have spoken of the “billion dollars” that has been invested in the fight against tax evasion, implying that this money was already at work.
The Reality: The billion dollars is the amount the government has promised to spend over six years, ending in 2022. As of the end of the 2016-2017 fiscal year, less than $40 million of that $1 billion had been spent.
To this litany of exaggeration, misinformation and falsehood can be added the fake tough talk that comes from the CRA every time there is a public leak of information from some bank or law firm operating in a tax haven.
Clearly, the agency cannot be trusted to produce an accurate and unbiased estimate of the tax gap and Canadians deserve an independent analysis of the scale of uncollected taxes. When the CRA fails to do its job and collect those taxes, the rest of us have to make up the shortfall.
Canadians deserve an honest assessment of the extent of the problem. The only way to get one is through the work of the Parliamentary Budget Officer. The CRA finally agreeing to co-operate with him means that after six long years of delays and a threat of court action, that work can finally begin.
Charlottetown Sen. Percy Downe has also tabled a bill in the Senate requiring the CRA to cooperate with the PBO in its study of the tax gap and to report on all convictions for tax evasion, including a separate list of convictions for overseas tax evasion.