[Editor's note: Over the holidays The Tyee received this response from Conservative MP Gerald Keddy to Dennis Howlett's opinion piece keying off the B.C. case of Arne Sobe, headlined "Let's Go after the Real Tax Cheats: Rather than target a senior with dementia, CRA needs to hit off-shore havens." We publish Keddy's rebuttal here, with a reply by Howlett.]
I am responding to Dennis Howlett's misleading and irresponsible editorial in The Tyee (Dec. 18) regarding the Canada Revenue Agency's (CRA) ability to crackdown on international tax evasion, laying-off auditors, and the Agency's cooperation with the Parliamentary Budget Officer (PBO). As a self-professed tax expert, Mr. Howlett continually fails to understand and acknowledge the CRA's strengthened ability to pursue international tax evasion cases.
Firstly, with respect to Mr. Sorbo's case, the CRA is prevented from commenting due to the privacy provisions in the Income Tax Act. However, the CRA has reached out to Mr. Sorbo's representative.
Mr. Howlett falsely claims that the CRA has chosen not to get tough on tax haven and tax dodging practices.
In fact, through Economic Action Plan 2013, our Government invested $30 million over five years for the CRA to implement multiple legislative tools aimed at cracking down on international tax evasion and aggressive tax avoidance.
From 2006 to March 31, 2014, the CRA audited over 8,600 aggressive international tax cases, identifying over $5.6 billion in federal tax owing, which is being collected. As a result of our unabated action on this file, Canada now has one of the most extensive tax treaty networks in the world, with 92 tax treaties and 21 Tax Information Exchange Agreements in force.
Mr. Howlett also intentionally misleads readers to believe that Statistics Canada's data tables identifying Canadian direct investment abroad, by country, indicate that Canadian taxes are being evaded. This is false. It is legal for Canadians to own a foreign bank account with Canadian deposits as long as they comply with Canada's tax laws.
Furthermore, I can assure that the CRA has been actively working with the PBO regarding his requests for information.
The Income Tax Act prohibits the CRA from providing protected taxpayer-specific information. However, the CRA has offered to provide carefully reviewed aggregate level data to the PBO to prevent the inadvertent disclosure of confidential taxpayer information.
The CRA does not estimate the tax gap because there is no recognized or reliable methodology for producing such a measurement. Rather than hypothetical and inaccurate measurements, the CRA relies on robust auditing. In fact, the OECD stated that "Measuring the tax gap is prone to conceptual and practical difficulties."
Finally, Mr. Howlett is grossly misinformed in his claim that hundreds of senior tax auditors have been sent lay-off notices. The CRA is not reducing the number of auditors and tax avoidance experts. The CRA's internal reallocation exercise will actually increase CRA's complement of auditors. Moreover, the PBO's latest expenditure report confirmed that our Government is investing substantially in CRA's compliance program.
As a result of our Government's strategic investments, the CRA's capacity to pursue cases of international tax evasion is the strongest it has ever been.
Gerald Keddy, parliamentary secretary to the minister of national revenue and ACOA, MP for South-Shore St. Margaret's
In defending the government's current policies to fight the growing practice of tax dodging using tax havens, [Gerald Keddy] points to the Canada Revenue Agency having "identified over $5.6 billion in federal tax owing." He fails to mention how much has been actually collected, which is the most important measure of success. Instead, the government avoids providing a figure for what they have actually collected, because this would be a substantially lower amount.
Canadians deserve an accountable, transparent accounting rather than the occasional vague media announcements about their optimism for snitch lines to track tax avoiders. Mr. Keddy is correct in saying that it is not a crime to have a tax haven account if this income is properly reported in tax returns. While the myriad of tax loopholes encourage corporations to use tax havens to legally shift profits to avoid taxes in Canada, French and American government studies have concluded that over 90 per cent of wealthy individuals with tax haven accounts were doing this to evade taxes.
I am perplexed by Mr. Keddy's comments around the Tax Gap Estimate. It has been two years since the Parliamentary Budget Office publicly requested co-operation from the CRA to provide information to start this work. As of Dec. 2014, there have been some meetings towards this goal but no concrete action. In fact, nothing seems to have changed since April 2014 when the government voted against a motion that would allow the PBO to do this work. If that has somehow changed in the last two weeks, many fair tax advocates including Senators and MPs would love to know about it and would heartily approve.
Mr. Keddy's claim that the CRA is not reducing the number of auditors and tax avoidance experts is contradicted by the fact that the CRA has lost over 2,500 jobs in the past two years,- more than any other government department.
Most recently, on Sept. 18, an additional 220 staff, including senior auditors, received notice that they may be affected by further layoffs, according to the Professional Institute of the Public Service of Canada (PIPSC). The final number may end up being less than this because of how layoffs are implemented in the federal public service, but the government has definitely NOT been increasing staff capacity. It has been hobbled by poor organization and an unsophisticated approach. Instead, we get a witch-hunt against registered charities that have dared to criticize this government's policies.
Dennis Howlett, executive director, Canadians for Tax Fairness
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