Do you know just how much money our country is losing to overseas tax evasion?
The Office of the Parliamentary Budget Officer doesn’t. Apparently, neither does our government.
Most of us pay high taxes and, in turn, expect services from the government. But in recent years, many of these services have been reduced, or cut completely. Simply put, if overseas tax cheats don’t pay their fair share of taxes, the rest of us have to pay more to make up the shortfall, or face cuts to the benefits and services upon which we rely.
I asked the Parliamentary Budget Office (PBO) over two years ago to examine the economic impact of overseas tax evasion. Then parliamentary budget officer Kevin Page concluded that the best way to do this would be to determine the size of the tax gap — a job he was confident his office could undertake, if it was given the necessary data by the Canada Revenue Agency (CRA).
An analysis of the difference between what is owed in taxes and what is actually collected would provide a means of measuring the CRA’s performance and the scale of overseas tax evasion. The CRA, however, has blocked any attempt by the PBO to acquire the necessary information. The CRA’s justification for this lack of co-operation on measuring the tax gap may be partly found in its attitude toward the tax gap itself: It simply does not understand the value of it. This analysis would disclose the amount of dollars owed, but not paid, by overseas tax cheats to the federal government, which could further expose the agency’s failing efforts to combat overseas tax evasion. The United States, the United Kingdom, France, Turkey, Sweden and other countries all produce regular estimates of their tax gap, seeing it as, in the words of the U.S. Internal Revenue Service, a means of enabling government to “make better decisions about tax policy and the allocation of resources for tax administration.”
This is not an endeavour these agencies take lightly. Her Majesty’s Revenue and Customs (HMRC), the United Kingdom’s equivalent of the CRA, produces yearly estimates of its tax gap, calling them a “foundation for HMRC’s strategy,” which enables the agency to measure the effectiveness of its programs. In fact, it even looks to other countries’ estimates of their respective tax gaps for policies that might be worth adopting by the U.K. Similarly, the Swedish National Tax Agency uses its estimate as a means of risk management, helping it determine the best way to allocate the agency’s resources.
Another point bears remembering, as well. The PBO did not request that the CRA produce an estimate of the tax gap, but rather, offered to do the work itself, and showed the CRA how it could be done while respecting the confidentiality of tax records. The PBO even offered to cover the cost of the study. But the CRA remains unmoved. Not only does the government not want to estimate the tax gap, it doesn’t want anyone else to try to do it, either.
Given this government’s past response — on this and other files — and its attitude toward data ranging from scientific research to the long-form census, this uncooperative spirit is hardly surprising. But the fact remains that the CRA has a legal obligation to co-operate with the Parliamentary Budget Officer in fulfilling his mandate to “provide independent analysis to Parliament on the state of the nation’s finances.” The current state of affairs suggests an obvious failure on the part of the CRA to come to terms with a problem that is costing Canadians untold amounts of lost tax revenue. As a result, we risk an erosion of confidence in our taxation system, at a time when every dollar counts.
If the government will not take this problem seriously, then it is time for the Parliamentary Budget Officer to exercise the full authority of his office and take the CRA to court. Tax fairness, like justice, must be seen to be done, and we’re running out of options.
This opinion piece was first published in the National Post
Percy E. Downe is a senator from Prince Edward Island.