The federal government needs to take steps to stop tax cheaters from hiding their money in offshore havens, a parliamentary committee maintains in a report tabled today, but opposition MPs say the proposals are inadequate.
The House of Commons finance committee delivered its findings Wednesday on the use of financial havens to evade taxes, following more than two years of hearings and 36 deputations.
Its report makes 11 recommendations for tightening the rules so that Canadian taxpayers can't squirm out of their obligations to the government.
- The Canada Revenue Agency should crack down on virtually all use of offshore tax havens where a taxpayer is exploiting a legal loophole and doesn't have a legitimate business purpose.
- The CRA should gain the power to withhold tax refunds from businesses that don't identify to the CRA who their shareholders are.
- All banks, credit unions, stock brokers, life-insurance companies and currency dealers should be required to track who really owns any company that is their client.
The latter two suggestions follow testimony at the committee that shell corporations are sometimes used by people seeking anonymity in order to mask income from the government.
The committee also recommended that the CRA post the names of people and companies convicted of tax crimes for a full year on its website. Currently, the information is kept online for six months. By comparison, the U.S. Internal Revenue Service has details on its website about convicted offshore tax cheaters dating back to 2007.
In an emailed statement, Minister of National Revenue Gail Shea said the government would give "due consideration to the recommendations."
"Our government has long recognized that international tax evasion is a serious issue," Shea said, adding that the government has introduced "over 75 measures to improve the integrity of the tax system" since 2006.
Shea called on the NDP and Liberals to support the federal budget, which she said would give CRA the "tools it needs."
Opposition MPs said the recommendations by the majority-Conservative committee don't go far enough.
"Baby steps don't just cut it," said Murray Rankin, the NDP critic for national revenue.
"The government talks like they're doing something, yet look, the proof is in the pudding. They're cutting the CRA [by] 3,000 people over three years, $250 million, and we're supposed to think they're taking this seriously."
The New Democrats called for the government to calculate Canada's "tax gap" — the amount of revenue the federal treasury loses due to tax evasion. Other countries like Britain and the United States have official estimates of their tax shortfalls, but Canada does not.
The NDP also said Canadian corporations should be forced to reveal how much tax they paid in other locales, to give a complete picture of whether or how they're operating in offshore havens.
Liberal John McCallum echoed those concerns.
"We don't think the government report says anything very much," said McCallum, who served as revenue minister from 2004 to 2006.
"First of all, you have to estimate how much tax you think is being evaded in order to go after it.… And the second point is you need money to go after tax cheaters. And the government has been cutting the budget and the number of employees in CRA."
The finance committee's report was tabled a month after an unprecedented and massive worldwide leak of financial records from a number of tax havens became public. A global group of media outlets, including CBC News in Canada, used documents in the leak to reveal details on dozens of cases of money laundering, fraud and tax avoidance.
In his March budget, Finance Minister Jim Flaherty promised to set up a system for tipsters to report offshore tax cheats. Informants would get 15 per cent of the recouped tax in cases where the Canada Revenue Agency recovers more than $100,000.
It also emerged this week that the U.S. Internal Revenue Service is going after American clients of CIBC who might have used offshore accounts at the Canadian bank's Caribbean subsidiary to evade taxes.