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View Diane Lebouthillier Profile
Lib. (QC)
Thank you very much.
Hello to all my colleagues.
Mr. Chair, I would like to take this opportunity, before beginning my presentation, to wish you a happy birthday.
Thank you for this invitation to provide details on the Canada Revenue Agency's strategies to combat tax evasion and aggressive tax avoidance.
Let me begin by saying that the Government of Canada and the CRA are firmly committed to combatting tax evasion and aggressive tax avoidance on all fronts. And we are all committed to making things much more difficult for those who choose not to meet their tax obligations.
In fact, since 2016, the Government of Canada has made investments that have helped provide the CRA with better data, better methodology and, ultimately, better results.
In particular, these investments have enabled the agency to develop a strategy that promotes global data sharing. Let's face it, tax evasion and aggressive tax avoidance are complex global problems.
The CRA is working with international partners through various multilateral organizations, including the Organization for Economic Co‑operation and Development, or OECD, and its forum on tax administration, the FTA. I was pleased to see that Mr. Bob Hamilton, commissioner of the CRA, was appointed chair of the FTA in August 2020.
As a result of its modern and collaborative strategy, Canada is member to 93 tax treaties and 24 international tax information exchange agreements. In fact, Canada is one of more than 70 countries that exchange information through the country‑by‑country reporting system.
In addition, Canada participates in the electronic funds transfer reporting program, which is related to international electronic funds transfers over $10,000. And with the implementation of the common reporting standard in 2016, Canada, alongside nearly 100 other jurisdictions, benefits from financial institution data that identifies financial accounts held by non-resident clients for tax purposes.
With these improved resources and tools, the CRA is now able to focus on large multinationals, high net worth networks, the underground economy, cryptocurrency and real estate transactions.
The CRA is now seeing these signs of success because of the investments made by the Government of Canada.
In recent years, the CRA has assessed the equivalent of more than $12 billion each year through audits, more than 60% of which were related to tax avoidance by large multinationals and aggressive tax planning by high net worth individuals.
And I must note that these investments have generated approximately $5 billion in additional federal tax revenue, as of March 2021.
Additionally, the CRA's criminal investigations program has enhanced its ability to investigate the most serious tax crimes. It is important to note that the agency investigates complex cases in collaboration with its partners in the Department of Finance and the Department of Justice to close what may be perceived as legal loopholes. And I must remind you that the CRA has shifted its focus to more hard-hitting investigations, which result in more jail time and higher fines.
However, we must never forget that tax evasion often involves very complex domestic and international money transfer structures, which require the CRA to complete lengthy and time-consuming intelligence gathering processes.
I also want to note that we are increasingly seeing high net worth taxpayers using the court system when they are audited in order to avoid providing documents and information to the agency. And I want to emphasize that the volume of complex litigation is up significantly from previous years, with approximately 3,000 active cases considered high level in complexity.
As a result, first announced in the 2020 fall economic statement and confirmed in budget 2021, the Government of Canada has committed to invest $606 million over five years, beginning in 2021‑22, to continue this complex work.
These investments will close the compliance gap for high net worth individuals, strengthen technical support for high-risk audits, improve the CRA's ability to identify tax evasion involving trusts, improve the CRA's ability to stop fraudulent or unjustified GST/HST refunds, and, finally, improve the criminal investigations program.
In addition to the financial investments from budget 2021 legislative changes will also be put in place to strengthen the rules on transfer pricing, oral testimony, base erosion and profit shifting, and mandatory disclosure rules.
Before I conclude, I would like to wish the chair of this committee, Mr. Wayne Easter, a very happy retirement.
I want to thank you personally for your outstanding work on behalf of Canadians. We will miss you.
Mr. Chair, I am proud to say that the Government of Canada and the CRA have shown determination and innovation in creating effective and proactive approaches to identifying those who avoid paying their fair share of taxes or who are taking steps to do so.
Thank you.
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-22 16:19
Thank you.
Factually, a more complex audit will take more time, and factually, when the CRA has the onus of proof, it needs to gather evidence that will withstand a challenge in court. It does take more time because we think it's in the Crown's best interest.
That's what the OAG observed. They observed, in the more complex cases, that we did allow more time to get the information, because we needed that information to collect the taxes owed.
View Julie Dzerowicz Profile
Lib. (ON)
Thank you so much, Mr. Chair.
I offer a warm welcome to the minister for being here today.
Mr. Gallivan, welcome to you in returning to our committee.
There's a false narrative put forward by the opposition that our federal Liberal government has done nothing to tackle evasion and tax avoidance. We heard from Mr. Gallivan that we've actually made a significant investment since 2015 in terms of tackling tax avoidance and tax evasion. There has been $444 million invested in 2016, $523 million in 2017, $90.6 million in 2018, $150.8 million in 2019, and an additional $304 million in this year's budget.
Minister, we also heard, as you mentioned, that this significant investment of over $1 billion has resulted in over $5 billion of identified additional tax avoidance coming into our coffers.
We've also heard that there's the International Consortium of Investigative Journalists, who do a bit of a ranking. They're the ones who broke the Panama papers and they've ranked Canada nine out of 80 in the world. We're among the top in terms of actually being able to tackle these issues on a global scale. Therefore, I want to give a huge thanks to you for your leadership, and a huge thanks for the leadership at the CRA, for the extraordinary efforts and work that they have done. Thank you for that.
To truly appreciate our efforts and how far we've actually come, can you take a few moments to add a little context to our government's efforts to fund the fight against tax evasion, by describing the situation at the Canada Revenue Agency when you took over as minister in 2015, after nearly a decade of Conservative cuts?
View Diane Lebouthillier Profile
Lib. (QC)
Mr. Chair, I thank my colleague for her question.
I agree that combatting tax evasion is a difficult task for the government, a serious and complex one that takes time. We are tackling these very profound problems and very wealthy people who have the resources to hire the best lawyers and the best teams.
On the question of the Panama Papers, the government has invested over a billion dollars and has identified 900 Canadians. More than 200 audits have been completed and 160 audits are underway.
We have given the CRA the tools and resources to fight tax evasion. That fight was not a priority for the Conservative government, as was even confirmed publicly by one of their former ministers of national revenue, Jean-Pierre Blackburn.
View Francesco Sorbara Profile
Lib. (ON)
Thank you, Mr. Gallivan.
Minister, you've been the minister for the Canada Revenue Agency for a number of years. You have submitted a number of budget requests to the government, and in terms of asking for resources to be provided to the Canada Revenue Agency.
Can you again really touch upon just how much we have invested into CRA because of what you have requested as the minister of the Canada Revenue Agency?
View Diane Lebouthillier Profile
Lib. (QC)
I thank my colleague, who is also my parliamentary secretary, for his question.
Our government has invested over $1 billion in the Canada Revenue Agency. It actually had to organize an entire sector of the CRA so that, as I said, it could provide the resources and tools needed to be able to combat tax evasion. We had lost expertise. We have sought out people, we have signed agreements, country by country, and we are working with the OECD, the Organization for Economic Cooperation and Development. The CRA works at the international level. That is why it is so important to support the 2020‑21 budget. We are giving ourselves additional tools to ensure that the rules and the laws that enable us to take more effective action against tax evasion are tightened.
View Francesco Sorbara Profile
Lib. (ON)
I'll go back to Mr. Gallivan.
Mr. Gallivan, as you know, at the Canada Revenue Agency, the government has invested significant resources. Can you speak about this in terms of the ongoing breadth of proceedings that the CRA has undertaken, in terms of looking at aggressive tax planning and also, of course, on the tax evasion side, please?
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-22 16:53
Thank you.
I'll frame it in terms of the question about the additional billion dollars a year not making a dent, because I think it's true that the billion dollars a year is a tactical outcome. It's about the type of files that we're taking forward and the jurisprudence we're creating. That's what really has the strategic value. It's true that with an objective to find $5 billion over six years, we're already at $5.3 billion, but that's very operational.
I would again talk about the four cases at the Supreme Court, the many cases at the Federal Court of Appeal and the thousands of cases at the Tax Court, which is kind of trying to redraw the line of what acceptable tax planning is in this country. It's the reason why budget 2021 is now focused on additional lawyers and litigators for the Department of Justice.
Strategically, I think you see increased pressure on a sophisticated tax planning industry, and I think you see increased activism by the Department of Finance to close the loopholes that were surfacing, so in that way, the fight is really, I think, now before the courts, and in terms of the legislation as opposed to the audit floor.
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-22 17:10
We're approaching $100 million in identified, unpaid taxes, plus, when we find those cases, we mine them for others. In terms of ROI and the tactical benefits, it's tens of millions of dollars, cresting $100 million. In terms of deterrence, it's harder to track, but it's definitely there.
Samya Hasan
View Samya Hasan Profile
Samya Hasan
2021-06-17 12:02
Thank you so much for inviting me to be part of this panel today. I really appreciate the timing of this invitation.
As mentioned, my name is Samya Hasan, and I am the executive director of the Council of Agencies Serving South Asians. CASSA is a social justice umbrella agency supporting the well-being of South Asians in Canada.
I’d also like to acknowledge that I am joining you today from the traditional territory of the Mississaugas of the Credit, which is covered by the Williams Treaties, and its colonial name is Durham region.
It's a difficult moment for me to speak today, as the entire Muslim community in Canada grieves the loss of the Afzaal family, as we witness the hate crimes against Black Muslim women in Alberta, as we see videos circulating on social media celebrating the London terrorist attack, and as we hear about the violent threats being made to a number of mosques in the GTA. However, I am here today to support our communities at this difficult time with hopes that the four Muslim Canadian lives lost will be far too many for our political leaders and that urgent action will be taken to reassure the Muslim community once again that we are safe in this country.
The disproportionate impact of Islamophobia on Muslim women has been widely documented in Europe, the United States and Canada. Clearly, Islamophobia is a gendered crisis; it operates according to gendered stereotypes of Muslim men as violent, terrorists and abusive, and of Muslim women as accomplices or oppressed. This is especially true for visibly Muslim women who choose to wear the niqab or the hijab, due to the preconceived notion that Muslim women have been forced to dress this way by patriarchal systems.
In fact, in a survey published by the Toronto Star in 2017, 56% of Canadians believed that Islam suppresses women. On the contrary, there is very little understanding or recognition of the worldwide movement of Muslim women to wear the hijab as a sign of empowerment. These stereotypes of Muslim women in policies, political rhetoric and the media lead to increased Islamophobic incidents against visibly Muslim women. One such policy was the now dismantled barbaric cultural practices act of 2015. Due to the limited time I have today, I'm not going to talk about the online hate component, as I know my colleagues have probably discussed it, and my sister, Amira Elghawaby, has talked about that at length.
For a long time, we shamed France for its anti-hijab and anti-niqab policies, yet we have a province in our own country that passed unconstitutional policies without any evidence of harm to society based on what Muslim women can or cannot wear. In these policies, we see the height of hypocrisy of modern, white feminism, which is led mainly by white women, to the exclusion and detriment of visibly Muslim women and other racialized women who feel empowered by their faith and choose to wear the hijab or the niqab.
On the other hand, widely believed stereotypes of Muslim women as being oppressed in their own communities do not do Muslim women any favours. In fact, it is the state that passed the Islamophobic policies and it is the state that is oppressing Muslim women by limiting their freedom to choose. It is the state that oppresses Muslim women by sitting idly while their human and constitutional rights are being abused and doors to opportunities in this country are closed for them, just because they choose to dress a certain way. This is systemic social and economic exclusion of visibly Muslim women, yet we are silent. Decades of being exposed and victimized by Islamophobia described in detail by my other colleagues today have led many Muslim women to feel unsafe, defensive, distrustful and afraid, afraid that anything that they do or say can be used against their communities by the media.
To address this crisis, I urge this government to work with Muslim women and Muslim-led community groups and organizations to combat Islamophobia with a focus on the gendered impact of this crisis. I urge this government to work with the provinces to mandate a community-informed education curriculum on Islamophobia, among other areas of anti-racism such as anti-Black racism and anti-indigenous racism, especially in public schools, so that our children grow up to respect people of all faiths, cultures and races.
Finally and most importantly, I urge this government to implement restrictions on online hate and legislate penalties now for social media platforms for not shutting down hate content.
I'm going to end with the brilliant words of Dr. Yaser Haddara from Hamilton from an article I read earlier this week:
Our leaders must take the needed hard look in the mirror. They must take responsibility for their own actions and those of their political parties and supporters. They must commit to do better and they absolutely must do better. Hate thrives in the dark. We fight it with transparency, accountability, and equality before the law. No more special laws,—
That's with reference to Bill 21:
—no more secret audits,—
That's with reference to the report from last week showing the CRA unfairly targeting Muslim charities over the last decade:
—no more double standards. Anything less, and I fear we’ll soon stand again in yet another Canadian city to mourn more Canadians lost.
Thank you for your time.
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 15:33
Good day, Mr. Chair.
To maximize the time for questions, I might just cover some key points of emphasis. The full remarks are filed with the clerk of the committee.
Both the Government of Canada and the CRA are firmly committed to combatting tax evasion. We are also determined to make it much more difficult for all those who intentionally choose not to meet—
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 15:34
It must be recognized that international tax evasion and aggressive offshore tax avoidance are very complex global issues.
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-10 15:34
Thank you, Mr. Chair.
Through the government's investments, which have been announced in federal budgets since 2016, the CRA has been able to equip itself with tools and resources that allow collaboration and exchange of data at a global scale and provide much more transparency for Canadians.
Because of these investments by the Government, the CRA has benefited from better data, better partnerships, and ultimately, better results in its fight against tax evasion.
Canada is one of more than 70 countries that exchange information via country-by-country reporting. Since 2015 Canada has participated in the sharing of data related to international electronic funds transfers of over $10,000. Additionally, with the implementation of the common reporting standard in 2016, Canada and nearly 100 other jurisdictions have been able to benefit from data from financial institutions that identify financial accounts held by customers who are non-residents for tax purposes.
Thanks to budgetary investments since 2016, the CRA has observed excellent signs of success. In fact, the agency has identified over $12 billion in gross audit assessments every year, over 60% of which is related to tax avoidance by large multinational corporations and aggressive tax planning by wealthy individuals. While the CRA had committed to finding an additional $5 billion over five years, we actually achieved that goal a year early, despite the pandemic. In addition, our proven results demonstrate that we're taking the right tax cases to the Tax Court of Canada, the Federal Court of Appeal and the Supreme Court of Canada.
Of course, there is still work to be done, but we have a proven track record to show that we are making it increasingly difficult for non‑compliant individuals to continue their activities.
As part of the fall economic statement 2020, and confirmed in budget 2021, the government committed to investing an additional $606 million over five years, starting this fiscal year. Notably, we are working to close the high-net-worth compliance gap, bolster technical support on high-risk audits and enhance the criminal investigations program. These investments will allow the CRA to fund new initiatives and extend existing programs targeting international tax evasion and aggressive tax avoidance.
The Government of Canada's continual investment in fighting tax evasion and aggressive tax avoidance promotes an international exchange of information that is both modern and collaborative, and ultimately ensures that all Canadians pay their fair share.
Alexandra MacLean
View Alexandra MacLean Profile
Alexandra MacLean
2021-06-10 16:49
Thanks very much, Mr. Chair.
I just wanted to add how seriously we take our mandate in international and large business directorate. We have been staffing up and we have been focusing on training. As the member indicated, we are challenging very well resourced interests that have very well qualified advisors. They have very deep pockets. There is a strong focus on improving training and making sure our people are well equipped to take on the most challenging and complex tax situations.
We have also invested a lot in information technology. I think Mr. Gallivan has touched on that in some of his answers. The amount of data coming into the agency is better than it has been in the past by quite a lot. We're better able to detect relationships and transactions than we were in the past, for sure.
However, it is a challenging business. There's a lot of money at stake, as many people have mentioned during this afternoon's proceedings. A lot of resources are deployed, I guess, on both sides, but particularly in the interest of high-net-worth individuals and multinational enterprises.
I wonder if my colleagues from Finance want to highlight.... We are quite excited about some of the budget 2021 initiatives that will help us deal with base erosion.
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-06-08 11:07
Thank you, Madam Chair.
I am happy to be with you once again, to discuss “Report 7—Canada Emergency Wage Subsidy”, released in spring 2021 by the Office of the Auditor General of Canada, or OAG.
With me today are Ted Gallivan and Maxime Guénette, whom you already introduced.
My focus today is on the response of the Canada Revenue Agency, or CRA, to the motion adopted during meeting 27 of the Standing Committee on Public Accounts related to its study on report 7.
The motion requested that both the Department of Finance and the CRA provide the committee with:
all studies, data and analysis used for the implementation of the Canada Emergency Wage Subsidy, that these documents be provided to the committee with redactions for Cabinet confidence and personal information, and that these documents be provided to the committee no later than May 27, 2021.
Upon adoption of this motion—
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-06-08 11:08
I'll start where I left off. It's getting close to the end.
Upon adoption of this motion, the CRA immediately set to work to meet the committee's expectations. I acknowledge the efforts of numerous employees across the agency, representing both a significant and a necessary time investment to perform this work within the stipulated deadline. Their effort underscores the seriousness with which the agency takes its duty to be both transparent and accountable to Parliament and to Canadians.
Thank you again. We welcome any questions you might have today.
Ted Gallivan
View Ted Gallivan Profile
Ted Gallivan
2021-06-08 11:17
Madam Chair, what I would say is that this is an internal document that we produced based on a number of assumptions. Our own internal analytics folks would have made a number of assumptions to produce that analysis. That is an estimate to help guide the level of effort that was necessary. It's not a projection but perhaps an outer limit that we used for planning purposes to allocate resources. It's based on assumptions, and only time will tell whether those assumptions will be proved to be correct.
Maxime Guénette
View Maxime Guénette Profile
Maxime Guénette
2021-06-08 11:43
Thanks, Commissioner. Thanks, Madam Chair.
There are two sections of the Access to Information Act that were invoked, the principles of which were invoked for redactions in the package that you see.
In the case of the particular paragraph that is being referenced, it would be paragraph 16(1)(c) that applies. This is information whose disclosure could jeopardize our ability to enforce the law, essentially, so the information that you would see redacted, without getting into the details of what's behind that particular paragraph, is information that would telegraph perhaps a bit too much to the general public about the ways in which we'll conduct our audits or the areas where we would focus more of our attention.
The way that these redactions were applied, of course, was by access to information folks within my team with delegated authority. Even though this is not an access to information request, these are the principles that we use, and when we make recommendations, we would check in also with the experts—in this case, in Mr. Gallivan's shop—to validate that the risk of injury is what we understand it to be.
In this case, maybe Mr. Gallivan would have something to add to that.
View Luc Berthold Profile
CPC (QC)
Thank you very much, Madam Chair.
I'd like to begin by thanking the witnesses for being with us today.
I know that having to put programs in place quickly during a pandemic has its own set of concerns and risks. As we read through the documents you sent us, we could see which risks had been raised and which had been proven to be real over the weeks and months.
My question is for Mr. Hamilton.
I was surprised to see that, in several places in the documents, there was reference to reputational risks to the Canada Revenu Agency.
Can you explain to me the extent to which these risks were considered among the major potential impacts? Why was so much attention paid to them?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-06-08 12:40
I thank the hon. member for his question.
The agency's reputation is important to us, both in times of pandemic and in normal times. It's important because for the tax system to work, Canadians need to have confidence in the agency. So, the agency's reputation is a factor in the decision to participate in the tax system, among other things.
View Luc Berthold Profile
CPC (QC)
You'll understand why I'm asking this question. This is a discussion I want to have because I want to understand what Mr. Gallivan was talking about earlier. He talked about the risk associated with the very small number of audits that will be done of individuals and businesses that received the wage subsidy.
Does the agency want to maintain that tough image, and has this program hurt that image, which you have to maintain to make sure that people pay their due to the government?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-06-08 12:41
These are two aspects of the agency's reputation.
First, it is its ability to deliver benefits in a timely and efficient manner. Second, it is its ability to ensure that those who receive benefits are eligible for them. It's important for us to preserve both aspects of the agency's reputation.
That was a consideration in the period after benefits began, and that process is still ongoing.
View Luc Berthold Profile
CPC (QC)
In terms of collecting money owed to the government, are you concerned that the lack of audits that will be done on the emergency wage subsidy will damage the agency's credibility?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-06-08 12:42
It is certainly always possible to criticize the agency, but I'm very pleased with the balance that we've been able to achieve in this context, as we did audits early in the program. Mr. Gallivan described actions that the agency took during that period, including using information obtained by our auditors. However, at the same time, there was a need to pay benefits.
I think we've struck a good balance, and now we're in the process of doing a little bit more post‑payment auditing, just to make sure we correct any errors that may have occurred.
In my opinion, as far as the reputation of the agency is concerned, I think we've struck a good balance in terms of auditing.
View Francis Drouin Profile
Lib. (ON)
Great. Thank you.
I'll switch gears.
Some Canadians, obviously, felt the impact of their government accounts being closed with the CRA. Can someone explain to me what happened there and why the government took the precaution to shut down these accounts? What is the best way for Canadians to prevent that from happening?
Marc Brouillard
View Marc Brouillard Profile
Marc Brouillard
2021-05-31 16:47
I can answer the first part of that question, Mr. Chair.
The CRA has been proactively using different methods and third parties to look for signals that accounts have been identified and potentially compromised. This is anything from, again, going back to the capabilities where there have been previous compromises or known lists of identities that are suspicious. All they do is deactivate the accounts. They contact the users, and they tell them that they may have been compromised and that this may have been part of some other event that may affect other accounts like their bank accounts, Facebook accounts and things like that. It is giving Canadians a proactive piece of advice that they need to look at their cyber-hygiene and that they need to take action.
With regard to the CRA accounts, there's a process for them to re-establish their accounts. They don't lose their accounts permanently. It's just that they have to reset their passwords and re-establish their identities.
I would leave it to Mr. Jones to talk about what other cyber-hygiene activities Canadians should take to protect themselves overall when this happens or just even as part of due course.
Scott Jones
View Scott Jones Profile
Scott Jones
2021-05-31 16:48
Mr. Chair, I'll quickly add in on what Canadians can do.
The first thing is this: Don't reuse passwords on accounts that you really care about. In fact, don't reuse passwords. We recommend that Canadians use things like password managers, something that will autogenerate some random, complicated string of passwords.
For things that you really care about though, use unique passwords. Turn on multifactor authentication. That means asking it to send you a text message when you're logging in, logging in from a trusted device, or having one of those hard tokens, although most people won't use those because those are kind of hard to use. However, turn on something so that it verifies.
Security questions are not multifactor authentication. That information has been stolen, so don't count on that as a second factor. When we talk about that.... So, it's something you know: your password. It's something you are: in the physical world, a fingerprint or a picture or something like that. It's something you have. That's where we talk about your getting a text message on your phone that gives you a code to log in with for the next few minutes, etc. That's multifactor authentication.
Turning on those things already makes you a much harder target. Those are simple things you can do. I encourage every Canadian to go in and change the passwords for the things you care about, the things that can have harm to you as a citizen. Set it to a hard password—better yet, a pass phrase if its allowed—something that only you know, that only you can remember. If you're going to write it down, lock it away somewhere and hide it. Don't tape it under your keyboard. That's the first place anybody looks.
Percy E. Downe
View Percy E. Downe Profile
Hon. Percy E. Downe
2021-05-06 15:35
Then we had the leaks of the Panama papers and the Paradise papers, showing thousands of accounts involving thousands of Canadians. Among many glaring examples of inaction by Canada’s revenue agency are the Panama papers, disclosed over five years ago and listing 900 Canadians with accounts in that one law firm in Panama.
Since then, other countries around the world with citizens identified in the Panama papers have collected over $1.36 billion in taxes that were owing to them. Australia has recovered over $172 million, Ecuador $105 million, and Spain $209 million. Even Iceland, a country of 370,000 people, has recovered $32 million. In the case of Canada, five years later, no one has been charged and no one has been convicted for tax evasion as a result of the Panama papers, and there have been no charges or convictions related to Liechtenstein or Switzerland.
Meanwhile, the Canadian government doesn’t even know the size of the overseas tax evasion problem. The Parliamentary Budget Officer has been trying to estimate the tax gap since 2012, but the CRA won’t co-operate.
For a comparison of what action a country can undertake, look at what Australia has done about overseas tax evasion. They established Project Wickenby in 2006, when eight government agencies came together to, in their words, “protect the integrity of Australia’s financial and regulatory systems” by cracking down on use of illegal tax havens. In that time period, the Australians collected over $750 million. A number of people were charged and a number were convicted. They concluded Project Wickenby by establishing the Serious Financial Crime Taskforce.
In Canada, in the case of Liechtenstein, the CRA, in their words, “waived referrals for potential criminal investigation to gather information”. In other words, the agency promised not to charge the people involved in that tax scheme in exchange for them explaining to the CRA how it actually worked. However, any lessons learned from the Liechtenstein affair in 2008 have obviously not been very effective, since no one has ever been charged or convicted, for all the additional leaks over the last 12 years.
Because the CRA has been so incompetent on overseas tax evasion, a number of things have happened: One, we don’t have the money to fund our priorities; two, the rest of us have to make up the shortfall by paying more taxes; and, three, Canadians are wondering why we have a two-tiered justice system for tax evasion. Try to cheat on your domestic taxes and the CRA will likely find you, charge you, convict you and force your repayment. Check their website and you'll see their results. Hide your money overseas and you likely will never be charged or convicted. Again, check their website and you'll see the results.
Canadians might want to ask why people are being treated differently depending upon whether they’re evading their taxes at home or overseas.
Colleagues, I would suggest the following measures for the committee to consider.
One, measure the tax gap.
Two, change the law so that it becomes an automatic criminal offence to have an undeclared account overseas and those who don’t declare their overseas accounts will automatically serve jail time.
Three, introduce beneficial ownership legislation so we know who actually benefits from financial transactions.
Finally, change the salary structure at the Canada Revenue Agency to retain experienced and specialized employees. Too many of them are being recruited by the other side for substantial salary increases.
Thank you, Chair.
Lucia Iacovelli
View Lucia Iacovelli Profile
Lucia Iacovelli
2021-05-06 15:44
Thank you for the invitation to appear before this committee.
I am KPMG's Canadian managing partner for tax.
Before I commence with my remarks, I'd like to extend my sincere sympathy to Ms. Watson and all of the other victims of the Cinar fraud. We know that you've been seeking answers for a long time, and I wish we could help you. We simply do not have any connection to Cinar. We were not their auditor or their tax adviser. We did not help any of the people who carried out the fraud to take your money or hide your money.
At KPMG we ensure that our clients are able to work within the tax system, achieve their goals and pay the tax they are required to pay. That is the lawful tax planning work that we do for our clients across Canada every day, and in accordance with KPMG's policies, practices and culture, we ensure the highest standards of integrity, compliance and professionalism.
Like most professionals, as CPAs we are required to protect the confidentiality of information regarding our clients and former clients. We take that obligation seriously, but when we receive a legal order requiring us to disclose client information, we comply with it. In February 2017, for example, in accordance with the CRA requirement, we provided the CRA with all the names and all of our files related to the OCS implementations in the Isle of Man.
I would also like to address recent reporting by the CBC, which is focused on four corporations, referred to as the “sword” companies, which were established in the Isle of Man in the early 2000s. It's alleged that these companies were used to facilitate the Cinar fraud. I don't know whether that's true. I do know that any implication that KPMG had anything to do with the Cinar fraud is false. Any implication that KPMG was in any way involved with the “sword” companies is also false.
We can state this with confidence because we undertook the comprehensive and detailed due diligence of our files, records and personnel. We combed through millions of pages of documents. We reviewed our time and billing systems. We examined our client file databases, and we interviewed people. We took the added step of reviewing publicly available corporate documents from the Isle of Man. Through all of this, we found nothing that suggested that KPMG had any association with the “sword” companies.
We provided this information to the CBC, making it clear that they were mistaken, but they persisted in publishing irresponsible and misleading stories. As a result, our lawyers served a notice of libel on the CBC last week. The CBC's allegations mistakenly rely on emails, written 15 years after the fact, by a woman named Sandra Georgeson, and on similarities between the “sword” companies and KPMG client companies.
Let me address these mistakes one by one. KPMG, like other firms, commonly uses the support of corporate service providers to set up and help administer companies. There are a lot of these firms that do this work around the world. Ms. Georgeson worked for one such firm in the Isle of Man. In the early 2000s, KPMG in Canada offered a legal tax plan, known as the OCS. The OCS required the incorporation of companies in the Isle of Man, and Ms. Georgeson's firm was retained to do so. Fifteen years later she was asked by her new employer to prepare a list of these companies. Her recollection in 2015 was that the “sword” companies were examples of KPMG OCS implementations. They were not.
In its reporting, the CBC pointed to similarities in the sequential registration numbers, named directors, signatories and filing addresses between the OCS and the “sword” companies as evidence that KPMG set up these companies. The CBC is simply wrong in drawing this inference.
The similarities exist because whoever registered the “sword” companies used the same corporate service provider as KPMG, but our diligence shows that the “sword” companies do not belong to, or are in any way connected to, KPMG.
I wish we could help reunite the victims of this fraud with their money and bring the perpetrators to justice, but we can't. KPMG simply does not possess any information that could assist with the Cinar investigation.
Putting the CBC's unfounded theories about Cinar aside, the broader issue that is before the committee today is how Canada could combat aggressive tax avoidance and tax evasion.
We applaud the committee's review of this important issue. We share the committee's desire and we welcome the opportunity to contribute to the discussion today.
Thank you.
Debi Daviau
View Debi Daviau Profile
Debi Daviau
2021-05-06 15:50
Thanks for having us.
My name is Debi Daviau, and I'm the president of the Professional Institute of the Public Service of Canada, or PIPSC. It's the national union that represents some 12,000 auditors and other tax professionals at the CRA across the country. Our members are skilled professionals and knowledgeable tax experts who ensure that powerful corporations and wealthy individuals remain just as accountable as the rest of us.
With me today is Mr. Ryan Campbell, our union economist and my technical adviser today.
We'd like to thank you for the opportunity to present our views on this critical issue. Together we'd be happy to answer any and all questions you may have after our presentation.
We've researched this issue from the point of view of tax professionals at the Canada Revenue Agency and produced three reports on tax avoidance and evasion. You can find them on our website at PIPSC.ca. I'd be happy to forward copies to the committee members as a follow-up to this meeting.
Few Canadians enjoy paying taxes, but they understand that it's important to do it. Taxes fund the public services that make us healthier and safer, protect the environment and nurture a stable economy in which businesses can thrive and compete.
A healthy tax system is defined by fairness and integrity. The rules must apply to everyone. Unfortunately, many wealthy individuals and corporations use their superior resources to look for a shelter or haven where the tax rules don't apply. While these privileged few get a reduced tax bill, governments lose revenue for public services, resulting in either service cuts or tax hikes for everybody else.
In February 2018, we conducted a survey of professional staff at the CRA, including auditors, managers, forensic accountants, economists, statisticians and actuaries. Their responses were eye-opening.
Much of the criticism levelled at Canada's tax system is that while it is designed to be fair, it's easier for some to get around the rules than it is for others. In our survey, nine out of 10 tax professionals at the Canada Revenue Agency agreed that it's easier for corporations and wealthy individuals to evade and/or avoid tax responsibilities than it is for average Canadians. Environics Research put that same question to the general public and found that eight out of 10 respondents felt the same way.
You should find it troubling that CRA professionals with special knowledge of the inner workings of the tax system were more likely to agree than an average Canadian. Over eight out of 10 also agreed that tax credits, tax exemptions and tax loopholes disproportionately benefit corporations and wealthy Canadians compared to average Canadians.
When asked if multinational corporations shift profits to low-tax regions, even when there is little or no corresponding economic activity taking place in that jurisdiction, three out of four respondents agreed. When asked if the CRA has adequate audit coverage capacity to ensure tax laws are being applied fairly across the country, only 16% of respondents agreed. When asked if training and technology advancements within CRA have not kept pace with the complexity of tax avoidance schemes, 79% of the respondents agreed.
All of these survey results confirm one basic fact: Canadians deserve a rigorous examination of the tax system.
Our CRA professionals are among the best in the world at what they do, but they face great challenges. Their job is to go after individuals and entities that in effect have unlimited resources and can aggressively exploit legal and international grey areas for their own gain. The CRA employees, by comparison, often feel outdone by those trying hardest to avoid taxes.
In 2012, sweeping budget cuts were introduced to the agency. Even with the more recent government reinvestments, it still doesn't have all the tools and staff it needs to get this job done
Does this make any sense when the Parliamentary Budget Officer's own numbers show a $5 return for every dollar invested in combatting international tax evasion and aggressive tax avoidance? Does this make sense at a time when government spending has skyrocketed to deal with the social and economic impact of the pandemic?
We need to fix this now. More than ever, Canadians need the tens of billions of dollars in tax revenue, if not more, that are sitting in offshore tax havens.
We believe that a number of steps can be taken to correct the situation.
First, we need better enforcement of existing tax laws. One of the simplest ways to make the system fairer is to ensure that the same rules apply to everyone.
Second, we need to prevent political interference at the CRA. This was particularly visible during the previous decade when the CRA was accused of shifting its focus away from big tax cheats to individuals, charities and small businesses.
Third, because CRA officials are frequently put in precarious situations in which they are asked to hold powerful players to account in a high-stakes setting, whistle-blower protection is crucial to ensuring that professional integrity is paramount during the tax assessment process.
Fourth, while government investments in the CRA have increased in recent federal budgets, Canada's population continues to grow, and so do the amount of commerce and the complexity of tax evasion schemes. The CRA needs to hire more technical advisers and to invest in technology and training to deal with these factors.
Fifth, the CRA must enhance the capacity of its regional offices. The Auditor General has found that taxpayers receive different treatment from the CRA depending on where they live and who they are. Its regional offices need the appropriate resources to ensure that laws are applied fairly from coast to coast.
Finally, a number of policy reforms need to be undertaken. Budget 2021 announced initiatives that when implemented will take tangible steps in the direction of tax fairness. These include a digital service tax for companies like Netflix and Amazon and the creation of a publicly accessible beneficial ownership registry. These are both important initiatives long championed by PIPSC members and our allies in civil society.
While these changes are welcomed, we still have work to do. The Parliamentary Budget Officer has estimated that as much as $25 billion of corporate tax revenue is lost to tax havens every year. We must do more to end the transfer pricing and profit shifting that facilitate this destructive practice.
As of now, some incremental steps are being taken, but there are a variety of additional actions that could be put in place. The end result would be a new, simplified view of the global commercial landscape, one in which corporations can be prevented from pitting countries against each other and are taxed fairly everywhere.
In conclusion, CRA professionals must receive the training, tools and resources they need to do their jobs. The CRA must receive appropriate funding to ensure that tax laws are enforced equitably and that wealthy individuals and powerful corporations are just as accountable as any other Canadian.
Additionally, there needs to be international co-operation and updates to legislation so that those who try the hardest to avoid taxes end up paying their fair share anyway.
Thank you for your time. Mr. Campbell and I would be pleased to answer your questions.
View Gabriel Ste-Marie Profile
BQ (QC)
Thank you.
There may have been a problem with the interpretation. I never implied that KPMG had set up strategies that were deemed illegal. That is not what we are talking about. To my knowledge, KPMG, an accounting firm, does not have the authority to refuse to provide such information to a parliamentary committee in Ottawa.
Just to make sure that we understand each other, the clerk can send you the request that I just made and you can provide us with your response within 30 days.
I will also ask you to provide us with the Canada Revenue Agency decision on each client file at KPMG Canada, including refunded taxes, accrued interest and penalties incurred, for each individual.
Thank you.
Lucia Iacovelli
View Lucia Iacovelli Profile
Lucia Iacovelli
2021-05-06 16:25
Okay.
I just want to point out that under my professional code of conduct, I'm not able to provide any details with respect to clients or former clients. Again, if there's a court order or legal order provided, I can provide that information.
We've provided all of the information with respect to the offshore structure to the CRA, along with files.
View Peter Julian Profile
NDP (BC)
Thank you very much.
I'm going to move on to Ms. Iacovelli. As Mr. Ste-Marie has mentioned, when a committee requests information, it's important to follow that request. As you know, there's a non-cooperative tax jurisdiction list, which basically lists tax havens around the world.
I have a series of questions. As well, we'll be following up with a letter that we'd like KPMG to answer.
First off, how many client companies or shell companies—you called them “client companies”—that currently exist in the Isle of Man and in all of the other tax jurisdictions that are “non-cooperative jurisdictions” has KPMG set up? That's my first question.
Second, how many were established since 1999—again, in the same list—by KPMG internationally?
How many have been dissolved or wound up since 1999? That's my third question.
My fourth question is, how many Canadian clients of KPMG invest in overseas tax havens, either offshore bank accounts or shell companies—you've called them “client companies”—and how many out-of-court settlements has KPMG negotiated on behalf of those clients with Revenue Canada?
Those are the questions that we will ask you to follow up on.
I also note that you are here voluntarily. We certainly appreciate that. We will be convening other witnesses from KPMG, I believe, including Serge Bilodeau, who runs your Montreal office, and we appreciate that co-operation.
Can you also indicate, when you receive a notice to preserve documents, how those notices are observed within KPMG internationally?
My final question is around Parrhesia, which you've acknowledged is a KPMG client company incorporated on the same date as the “sword” companies on December 17, 2001. First you said in your testimony that it was a common registrar that KPMG had approached, and then you said that nobody was engaged to actually incorporate Parrhesia. Could you clarify that, please? Who within KPMG actually moved to register that client company?
View Annie Koutrakis Profile
Lib. (QC)
View Annie Koutrakis Profile
2021-05-06 16:44
Thank you.
Senator Downe, you said in your testimony that the CRA has done a really great job on the domestic tax evasion side, but you've been critical of the agency's ability to address overseas tax evasion. What tools or powers does the CRA need to effectively address foreign tax evasion to the same extent as domestic tax evasion?
Percy E. Downe
View Percy E. Downe Profile
Hon. Percy E. Downe
2021-05-06 16:45
I indicated in my opening statement a suggestion on compensation as well. Some of the people at the CRA are really what I would call unicorns. They have unique skill sets that they have developed over 10 or 15 years working for the Government of Canada, but they bump up against a salary cap that is government-wide. We have to address that. We have to be able to retain these people so that they're not scooped up by those who are working, if you will, on the dark side of tax evasion. You can't blame people for wanting to improve their financial situation, but the government has to take some initiative to keep these people.
The second area—and others have covered it as well—is that some of these international tax units have either been merged with other responsibilities or totally disbanded, so we need a dedicated group, and we're not reinventing the wheel here. The CRA tells us how complex these cases can be, but it's complex for every country. As I indicated, Iceland, with 340,000 people, recovered $25 million through the Panama papers. We have not recovered anywhere near that, if anything, so there's something wrong there with the structure of the CRA, and senior management and/or the finance department should address it.
View Tamara Jansen Profile
CPC (BC)
Thank you very much.
Ms. Daviau, you mentioned how CRA was criticized in the previous decade for focusing audits on small businesses and charities and how that impacted auditing work. You also mentioned in your testimony that the focus should be on wealthy individuals and powerful corporations who do the majority of the cheating. Is there a justification for the fact that CRA appears to be aggressively focusing on small mom-and-pop shops for audits during COVID and ignoring the wealthy individuals and powerful corporations you just identified as the real problem?
Debi Daviau
View Debi Daviau Profile
Debi Daviau
2021-05-06 16:57
I actually don't think they're ignoring them; I just don't think they have the same capacity to address international taxes that they do to address local taxes.
I don't want to reiterate what those drawbacks are again, but certainly employees at the Canada Revenue Agency are up against, as I said, tax giants. These are people who have immense skill, technology, expertise and other big companies on their side. The CRA needs to be on a level playing field.
View Julie Dzerowicz Profile
Lib. (ON)
Okay.
I don't know who I should direct this to. Maybe it's for Mr. Cohen or even Senator Downe.
We've spent a significant amount of money to try to deal with tax evasion. My sense has been that it's to try to deal with a lot of the international tax evasion. I think it was $444 million in 2016. I know it was $523.9 million in budget 2017. I know that in our fall economic statement, we invested another $606 million over five years to close the high-net-worth compliance gap, to strengthen technical support for high-risk audits and to enhance a criminal investigations program.
Has none of that been helpful to actually deal with the tax evasion issues, primarily internationally, as we've been talking about?
Mr. Cohen—
Percy E. Downe
View Percy E. Downe Profile
Hon. Percy E. Downe
2021-05-06 17:05
I could answer that, Chair.
Of course you made the key point there, which is that it's over five years. When I asked for documentation of how the money was spent—for example, in 2019 I received a written question in the Senate—the government acknowledged that just over $250 million was actually spent from the 2016-17 budget. Then we find that the money was not spent quite where it was said it was going to be spent. The CRA advised us that they had to spend some of the money on funding towards employees' benefit plans. Obviously treating your employees fairly and fulfilling collective agreements is important, but it's not the same as cracking down on tax evasion, which was how the commitment was described in the budget.
I don't have any additional information on the money, although I do note that the revenue minister stated in response to a House of Commons question number 541 that in order to free up CRA resources for pandemic-related programs, many audits have been temporarily suspended as a non-critical service. I'm wondering what that means about overseas tax evasion.
All that is to say it goes back to the point I was making earlier. There's something structurally wrong in governance in the CRA and how they run their operation. That's an area that should be looked at.
View Elizabeth May Profile
GP (BC)
Thank you. I would love to give Sean back some time. I will try to be really brief.
I've been troubled for decades by consistent reports from the Auditor General's Office that CRA does not take seriously their efforts to go after fat cats with complicated structures and lots of lawyers as much as they do in going after little guys like my friends or in auditing my daughter as a university student. You have to wonder.
As experts in how CRA operates, going first to PIPSC—either Ryan or Debi—and then to Senator Downe if there's time, is there a cultural problem within CRA that's deep and systemic, which both through resources and culture would make them go after Canadians with limited means rather than pursue complicated files on well-heeled tax evaders?
Debi Daviau
View Debi Daviau Profile
Debi Daviau
2021-05-06 17:28
I personally don't think so. I think it's a question of not having enough resources, not enough supports, not the right organizational structure in place to maximize their ability to go after international tax cheats.
Maybe Ryan has something to add.
Ryan Campbell
View Ryan Campbell Profile
Ryan Campbell
2021-05-06 17:28
My interactions with auditors, which are numerous, suggest that they're driven by a deep sense of fairness and that what they want is a tax system that's defined by integrity and fairness. Nothing would make them happier than having rules and resources that would allow them to go after the “big contact” cheats, the ones who are trying the hardest to avoid taxes.
Percy E. Downe
View Percy E. Downe Profile
Hon. Percy E. Downe
2021-05-06 17:28
Sure.
It's the senior management of the CRA, and I have a long list that I can send the committee, if you're interested.
Let me give you one example of the problem at CRA. They announced in 2017 that 90% of calls to the agency were successfully connected to an agent or an automatic help line. The Auditor General investigated that claim and found out that they blocked 29 million of them. That meant that the overall success was 36%. Now, what agency of government thinks it's acceptable to claim 90%, when they block 29 million of the calls and then don't include them?
There's a long list of the ways in which they conduct themselves. I have not seen anywhere else in my experience in provincial or federal government that an agency or a department of government operates this way.
View Kelly Block Profile
CPC (SK)
I call this meeting to order.
Welcome to meeting number 29 of the Standing Committee on Public Accounts. The committee is meeting in public today and is being televised.
Pursuant to Standing Order 108(3)(g), the committee is meeting today to study “Report 4—Canada Child Benefit—Canada Revenue Agency”, of the 2021 reports of the Auditor General of Canada.
Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021, and therefore members may be attending in person in the room or remotely by using the Zoom application.
I have a few reminders for you.
Interpretation services are available for this meeting. You have the choice at the bottom of your screen of “Floor”, “English” or “French”. Before speaking, click on the microphone icon to activate your own mike. When you are done speaking, please put your mike on mute to minimize any interference. When speaking, please speak slowly and clearly. Unless there are exceptional circumstances, the use of headsets with a boom microphone is mandatory for everyone participating remotely.
Should any technical challenges arise, please advise the chair. Please note that we may need to suspend for a few minutes, as we want to ensure that all members are able to participate fully.
Now I'd like to welcome the witnesses who have joined us today.
From the Office of the Auditor General are Martin Dompierre, Assistant Auditor General; Philippe Le Goff, principal; and Lucie Després, director. From the Canada Revenue Agency, we have Bob Hamilton, commissioner of revenue and chief executive officer; Marc Lemieux, assistant commissioner, collections and verification branch; Frank Vermaeten, assistant commissioner, assessment, benefit and service branch; and Heather Daniels, director general, benefit programs directorate, assessment, benefit and service branch.
With that, welcome, all.
I will turn the floor over to Mr. Dompierre for five minutes.
Martin Dompierre
View Martin Dompierre Profile
Martin Dompierre
2021-05-04 11:05
Madam Chair, thank you for this opportunity to discuss our report on the Canada child benefit, which was tabled in Parliament on February 25, 2021.
Joining me today are Philippe Le Goff, who was the principal responsible for the audit, and Lucie Després, who led the audit team.
The Canada child benefit provides a non-taxable monthly payment to eligible families, based on their net family income. In the 2019-2020 fiscal year, the program allocated $24.5 billion to parents in Canada who were responsible for 5.9 million children under the age of 18. The Canada child benefit is a key public policy tool for reducing inequalities and poverty among low-income families.
Overall, we found that the Canada Revenue Agency ensured that the payments to millions of eligible families were accurate and timely. The agency had effective systems and processes to assess the eligibility of recipients.
However, we found opportunities to improve the program's efficiency and prevent its misuse. For example, requiring proof of birth at the time of application for children under the age of 11 months who were born in Canada would help agency staff verify a family's eligibility.
We also found that the agency sometimes lacked the latest information when it determined applicants' eligibility for the program and when it calculated payments. For example, in some of the samples we analyzed, we found that the agency was not always informed of changes, such as when a recipient left Canada. Payments continued until the agency received updated account information or until a parent ceased filing a Canadian income tax return.
Our audit also examined the one-time payment made to support more families at the beginning of the pandemic in May 2020. We found that the modified formula extended the benefit to an additional 265,000 families. The one-time payments were found to be accurate.
Finally, we found that the female presumption concept presented a challenge for the administration of the program, especially because of the diversity of families in Canada today. According to the program's conditions, benefit payments go to the parent who is the primary caregiver. By law, the primary caregiver is presumed to be the female parent. We found that in some cases the parent who in reality had primary responsibility for the care of the child did not receive the payment initially. In our view, the administration of the program would gain in efficiency by enhancing its procedures and communications to mitigate the confusion and sensitivities caused by this concept.
The Canada Revenue Agency agreed with both of our recommendations.
Madam Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.
Thank you for your attention.
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-05-04 11:09
Thank you, Madam Chair.
I'm pleased to have the opportunity to appear before you today to talk about the Canada Revenue Agency's action plan on “Report 4—Canada Child Benefit—Canada Revenue Agency” of the 2021 reports of the Auditor General of Canada.
I'm accompanied by three colleagues, whom you've already introduced.
In report 4, the Auditor General of Canada noted that the CRA managed the Canada child benefit program in a way that ensured accurate and timely payments to millions of eligible families.
The Office of the Auditor General, or the OAG, also found that the CRA could improve the administration of the Canada child benefit, or CCB, program by better managing the information used to assess eligibility for the program.
Within that context, the Auditor General of Canada made two recommendations to the CRA, which we accepted.
First, the AG made recommendations to improve the administration of the CCB program. They included updating the list of documents used to assess eligibility, requiring proof of birth for all applicants and greater collaboration with other government departments to ensure eligibility of applicants.
Second, the Auditor General recommended that although the female presumption concept is a legislative requirement under the Income Tax Act, the CRA should enhance its procedures and communications to mitigate any confusion associated with this concept.
The CRA has agreed with both recommendations, and has advanced a detailed action plan—which has been shared with the committee—that includes associated timelines in order to implement the recommendations.
I am pleased to report that the CRA is acting on both recommendations.
With respect to the first recommendation, the CRA conducted a thorough review of its online documents, training materials and other procedures to ensure that Canadians are better informed about the documents required to apply for this benefit, and we will require all training materials to be updated by the end of June of this year.
Additionally, by the end of July of next year, in order to conduct a comprehensive review and meet annual spring publishing deadlines, the CRA will ensure that two key documents, the RC66 Canada child benefits application and the program and eligibility guide called “Form T4114, Canada child benefit and related provincial and territorial programs”, as well as Canada.ca web pages, are updated to reflect these changes.
The CRA will conduct a review to be completed by the end of December of this year to determine the benefits and risks of the recommendation to provide proof of birth for all CCB applications.
Finally, by the end of July 2021, the CRA will consult with Immigration, Refugees and Citizenship Canada in order to determine the feasibility of receiving citizen information of CCB applicants.
With respect to the second recommendation, by the end of December 2021, the CRA will complete a review of its materials and update the aforementioned two key documents, as well as various canada.ca web pages in order to ensure applicants understand who the CRA considers to be the primary caregiver of a child, what is required for an applicant to prove they are the primary caregiver, and that only one payment per household can be issued.
In closing, I just want to highlight the importance of the CCB. In the 2019-20 fiscal year, as Mr. Dompierre mentioned, this important program allocated $24.5 billion to 3.3 million families in Canada and 5.9 million children.
Thank you, Madam Chair. I'm now happy to answer any questions the committee has.
View Corey Tochor Profile
CPC (SK)
Thank you, Madam Chair.
Thank you to our witnesses today. Thank you for doing the important work during these trying times during a pandemic to make sure the taxpayers' dollars are spent wisely. Any improvements on the system are much appreciated by everyone.
First off, you touched on the fact that 265,000 new families were receiving payments with the top-up. I have a question along those lines. It's a two-part question. I'm not sure who to ask first.
Has there been increased usage because people's incomes have been down due to COVID-19? Is that the reason there have been over a quarter million new families receiving benefits?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-05-04 11:15
I'm happy to take a stab at that, although Mr. Dompierre indicated that he wanted to also, so he may come in after me.
Yes, there was a special top-up to the CCB as a result of the pandemic. I think the first part of your question, and maybe the second part as well, was why we saw an increase in the number of families that were eligible for it.
That is really an arithmetic issue. The amount was raised $300, but the income thresholds at which it is clawed back did not change. As a result, as the maximum amount was ground down to reflect higher incomes, there was a group of 264,000 people who normally wouldn't have received the CCB but did receive it because of the enhanced value.
I'm not aware of any statistics relating to the incomes during the pandemic and whether that caused any effect. Perhaps one of my colleagues is aware, but I would have to get back to the committee on that one.
View Corey Tochor Profile
CPC (SK)
I have a follow-up question. What is the maximum that one family could earn because of bringing down that ceiling? What would be the maximum that a family would earn before receiving that payment?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-05-04 11:16
Maybe I will turn it to my colleague, Mr. Vermaeten, to give you the specifics of what it was as a result of that enhanced level. I don't have that number at my fingertips.
Frank Vermaeten
View Frank Vermaeten Profile
Frank Vermaeten
2021-05-04 11:17
I'm sorry; I don't have that statistic at my fingertips. People with quite a bit higher income could get a small amount of the CCB as a result of this.
With respect to your question on whether the lower incomes of COVID affect CCB entitlements, the answer is generally no. Currently the amounts of CCB that people are getting are based on their 2019 incomes. Starting in July, it's going to be based on their 2020 income. It will be in 2020, when we have processed those returns and that flows into CCB payments, that people will see the higher CCB amounts.
View Corey Tochor Profile
CPC (SK)
I appreciate that. Perhaps you could get back to me on what the ceiling was. I believe it was upwards of $300,000 that people could be receiving a payment, but if you could confirm the maximum amount they could earn and still qualify for the program, I'd much appreciate it.
On the train of thought with regard to the increase in people receiving payments, you made reference to the anti-fraudulence efforts you were studying there. Do we know how many people who applied for benefits were rejected, either as a percentage or the total number of families?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-05-04 11:18
As a general comment, we're still doing our analysis of how much people might have received—this would apply to all benefits—that they weren't eligible for, whether because of fraud or something else. We will only really have a good estimate of that once we get all of the 2020 income tax data in. The filing deadline has just passed. That process will be completed. At this stage, we don't have estimates of that amount.
With respect to the CCB, the subject of this meeting, again, I'm not aware that there would be a very big number of people who might have received payments who were ineligible for them, because it is an existing program. It's not a new program.
We will have more information on ineligible payments as we get through processing the 2020 tax returns.
View Corey Tochor Profile
CPC (SK)
If you could get back to me on that number, and also on the efforts to collect on the fraudulent claims of people who have been caught receiving payments, that would be much appreciated.
Is there any common theme in the fraudulent cases, as in geographically, or is there any analysis done on typical behaviours that increase fraud with CCB?
Bob Hamilton
View Bob Hamilton Profile
Bob Hamilton
2021-05-04 11:20
If we're talking about the CCB program, I'm not aware of any analysis of common themes, etc., but I will confirm that with one of my colleagues. If possible, I suppose we could come back to the committee afterwards with numbers. For this program, I would be surprised if it was a very big number.
View Jean Yip Profile
Lib. (ON)
Good morning. It's great to see everyone here to discuss a more positive report that found the CCB eligibility was well managed and that, more importantly, benefit payments were accurate and timely. Thank you.
My first question is for you, Mr. Dompierre.
The Auditor General found that the CRA has effective systems and processes in place to assess the eligibility of Canada child benefit recipients. Could you please elaborate on the nature of these processes and how they make the CCB program more effective?
Martin Dompierre
View Martin Dompierre Profile
Martin Dompierre
2021-05-04 11:21
As indicated, the CRA has effective systems and processes to assess eligibility. When we, for example, visited the tax centres, we saw first-level agents in action who were collecting the information and entering the information into the system in order to ensure that the applications were meeting the eligibility criteria. We also saw, as part of the sample we reviewed, that the agency had also a process in place to make sure that the amount of the payments made was meeting the requirement in the context of the net income tax and the revenue of the family.
We saw a number of controls put in place by the agency in order to ensure that eligibility was met and that payments were made in an accurate way. We did see some opportunities to improve some of the process to make the program better and to ensure that the program integrity was respected.
View Jean Yip Profile
Lib. (ON)
You mentioned that some of the agents took more liberty to verify information, which led to better authentication. Do we have any tracking to see how much improvement resulted from that?
Martin Dompierre
View Martin Dompierre Profile
Martin Dompierre
2021-05-04 11:23
As you indicated, when we visited the tax centres where these benefits were being administered, we saw that in some cases agents took the initiative to further validate the information that was being provided as part of the application. This was not done systematically for all of the benefits that were administered. We did not see any specific issues in that step. We felt that this additional step was definitely adding to the process and supporting the agents as they were doing their review of the applications.
View Jean Yip Profile
Lib. (ON)
In terms of the female presumption concept, what were some of the difficulties resulting from that? How can we fix it or mitigate the confusion and sensitivities caused by this concept?
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