Finance

The House of Commons Standing Committee on Finance met to study tax evasion and tax avoidance, hearing from officials from the Canada Revenue Agency (CRA), the Department of Finance, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), and the Office of the Parliamentary Budget Officer (PBO).

Marc Lemieux, Assistant Commissioner of the CRA's Compliance Programs Branch, stated that the CRA is making significant progress in identifying aggressive tax planning and tax evasion, with a fiscal impact of about $18 billion in 2024-25. He highlighted new mandatory disclosure rules that have received over 4,200 disclosures, and the use of new technologies like artificial intelligence. He noted that holding an offshore account does not necessarily mean tax wrongdoing and that the CRA must carefully review complex arrangements.

Adrianna McGillivray, Director General of the CRA's Compliance Programs Branch, addressed the Auditor General's 2018 finding of inequities in audit timelines for offshore filers, stating that the CRA has since standardized timelines to 30 days for information requests, with possible extensions. She reported that the offshore tax informant program has assessed approximately $500 million in federal tax and penalties since 2014, with over 1,000 submissions, but did not disclose the total reward amounts paid to informants.

Alexandra MacLean, Acting Director General of the CRA's International and Large Business Directorate, described tax havens as low-tax or no-tax jurisdictions and said corporations use them to maximize after-tax returns for shareholders. She noted that the CRA risk-assesses 100% of large businesses using about 250 algorithms and that it is harder for wealthy individuals to use such structures due to better tools and information exchange. She disagreed with the suggestion that more CRA staff are assigned to small businesses than large ones, stating audit resources are deployed based on risk.

Trevor McGowan, Associate Assistant Deputy Minister of Tax Legislation at the Department of Finance, explained that Canada's exempt surplus system allows active business income from treaty partners to be repatriated tax-free to help Canadian businesses compete globally, but passive income is taxed on an accrual basis. He said the global minimum tax (pillar two) is projected to raise about $2.1 billion per year, and the excessive interest and financing expenses limitation (EIFEL) rules are projected to raise $1.6 to $1.8 billion per year. He noted that the general anti-avoidance rule has been strengthened with new penalties for unreported transactions.

Eric Ferron, Director General of the CRA's Criminal Investigations Directorate, reported that from 2020 to 2025, there were 14 convictions for offshore tax evasion and 106 total convictions for tax evasion, with 25 cases currently under investigation or before the courts. He said Canada is seen as a leading country in combating tax evasion through the J5 partnership with the U.S., Australia, the Netherlands, and the U.K., and that cryptocurrency investigations are challenging due to rapidly evolving technology.

Annette Ryan, Deputy Director of FINTRAC, stated that Bill C-12 contains measures to strengthen the anti-money laundering and terrorist financing regime, but agreed that a statutory review beyond that bill is needed.

Jason Jacques, Interim Parliamentary Budget Officer, said his office has published reports on international taxation but cannot independently measure the tax gap because the CRA, citing section 241 of the Income Tax Act, does not share the necessary data. He noted that Bill S-217 would address this by giving the PBO access to that data. He stated that the government's own words identify a declining debt-to-GDP ratio as the most important fiscal anchor for securing Canada's AAA credit rating, and that the current path of that ratio is concerning.

Govindadeva Bernier, Director of Budgetary Analysis at the PBO, said the PBO has not done a specific analysis of tax avoidance as a percentage of GDP or compared it internationally, but could do so if requested by the committee. He noted that the global minimum tax's effectiveness may be limited if the U.S. secures a carve-out, as U.S. multinationals account for a large share of global corporate tax avoidance.

The committee briefly debated points of order regarding the relevance of questions, with members disagreeing on whether questions about carbon pricing and defence spending were germane to the study on tax havens. No motions or votes were recorded.