For many years I worked as one of the 11,512 tax collectors at Canada Revenue Agency. I spent a lot of time talking to Canadians from all walks of life. Despite our administrative differences, my colleagues and I seemed to share a common belief: the importance of a well- functioning tax system. Managed wisely, tax revenues can make a world of difference.
But during my time at the CRA I came to see a myriad of problems in the Canadian system – and so could the taxpayers with whom I was dealing. Canada isn’t alone in this. From Greece, to the United States, to Zambia, the globalization of finance and the emergence of tax havens has forced governments and citizens around the world to see that tax systems – global or national – are not working. Recent news of leaked information about mega-bank HSBC shows that 1600 Canadians are among its wealthy clients who count on a secretive and complicit financial industry to help them evade those tax systems. And HSBC is only one of many banks in one of many secrecy jurisdictions. These are symptoms of a disease.
Whether it is cutbacks and layoffs at the CRA or a lack of political will, the reality is that Canada is falling dangerously behind in its ability to scrutinize corporate and wealthy individuals’ tax returns. We have not kept pace with the global growth of tax havens and tax loopholes. In 2011, the Globe and Mail proclaimed: “We need a global army of tax collectors” . This would only be a bandage to a symptom.
Adding more officers to tackle tax evasion on the front-lines will not solve the problem of tax deficits wholesale. Canada needs better training, research, and cooperation across academic disciplines, from governments, policy makers, and especially input from front-line tax officers. It also needs to make decisions based on facts. The tax watchdog group Canadians for Tax Fairness has been incessant in its warnings that the government can’t continue to layoff senior tax auditors and expect to track money being funneled to tax havens. They have been helping Canadians realizethe symptoms of excessive global tax evasion beginning right in our home country.
There is an estimated $178B Canadian sitting, untaxed, in the world’s top 10 tax havens. That comes from calculations done by Canadians for Tax Fairness based on Statistics Canada data. We need a “Tax Gap Estimate” – the calculation that compares what Canada should be taking in at current tax rates and actual revenues. Such a methodical calculation has helped the U.S, Australia and Great Britain as well as about half of the OECD countries to figure out what is missing and where their revenue gathering agencies should be directing their resources.
Here in Canada, two successive Revenue Ministers have dismissed the idea on the grounds that such methods can’t be trusted. The Parliamentary Budget Office has been requesting the information from the CRA necessary to provide an estimate since 2012. And recently there have been some behind the scenes meetings between the CRA and the PBO on this topic. But despite the occasional “we’re working on it” from the Revenue Minister’s office, Canada is still in the dark.
How can the government claim good fiscal management when it doesn’t measure how well it is collecting taxes that are due? While Canada Revenue Agency has the duty to uphold the confidentiality of Canada’s taxpayers, it is not allowing researchers, its own employees (believe me I tried), to access necessary data (which could very well be disaggregated before reaching these parties) to analyze the tax situation.
It is wrong that Canada’s parliamentary budget office should have to fight so hard to get data it needs to fulfill its mandate. PEI Senator Percy Downe has been working to blow the cover off Canadian tax haven use for years. He recently suggested that it is well past the time for the PBO to take the CRA to court to get the information it needs. So instead of prosecuting tax evaders, we might have to spend those resources on taking our own government to court for to find out how much money is leaking offshore.
I write this from the standpoint of a former insider to the tax system, a concerned young person, and an active academic researcher.These symptoms are a forewarning. Allowing this to continue will place us in some of the most difficult situations we and our future generations will ever have to face.
Give Canadians the information they need.