NDP wants CRA’s auditing powers investigated

OTTAWA — The NDP is asking the auditor general to look into the Canada Revenue Agency’s ability to investigate large corporations and potential offshore tax evaders after recent data showed a stark drop in those audits in the four years leading up to the pandemic.

“More than five years after the Panama Papers and Paradise Papers scandals, the lack of results casts serious doubt on the CRA’s ability to be fair to all taxpayers and reinforces a sense of injustice to hard-working individuals and small and medium-sized businesses who work hard to pay their fair share,” reads the letter sent by NDP MP Matthew Green to the auditor general late last week. “I am writing to request that your office consider conducting an audit on the ability of the Canada Revenue Agency’s International and large business sector to carry out the volume of audits needed to ensure large corporations are meeting their tax obligations.”

His request comes two weeks after the Postmedia News reported that the yearly number of new CRA audits targeting large corporations had dropped by nearly 2,000 between 2016-17 (6,281) and 2019-20 (4,257), according to government documents requested by the NDP.

After publication, the agency specified that those numbers in fact also included audits involving high net worth or offshore workloads, high net-worth individuals, aggressive tax planning schemes and offshore compliance.

The government’s data also showed that the number of audits that led to CRA claiming unpaid taxes dropped very sharply from 5,127 to 2,059 during the same period.

At the time, the agency explained that the drop in new audits was not a bad thing, but rather because it had refocused its efforts targeting large corporations, wealthy individuals and offshore tax evaders to catch the “big fish,” a longer process that would eventually reap bigger results (in the form of unpaid tax dollars).

“We are performing fewer audits, but the audits that we are doing are producing greater results,” CRA spokesperson Etienne Biram explained at the time.

In data provided since the Postmedia News story first ran, the agency further detailed that the average “fiscal impact” — which includes all new tax assessments, reduced tax refunds, interest and penalties and all “future” federal tax that may be requested — of each of those types of audits had doubled between 2016-17 and 201920, jumping from $893,000 to $1.745 million.

But in the same period, the overall annual returns from those audits increased slightly until they dropped suddenly in the fiscal year leading into the COVID-19 pandemic. Data shows that the fiscal impact of these high net-worth individual, offshore and large corporation audits grew slightly from $8 billion in 2016-17 to $8.6 billion two years later, before falling to $6.4 billion in 2019-20.

“The COVID pandemic impacted operations for the both the CRA and taxpayers, hindering the ability to close a large number of large corporation audits and issue reassessments at the end of the 2019-20 fiscal year,” CRA spokesperson Christopher Doody wrote in a statement.