The Finance Committee of the House of Commons (FINA) has just released a report entitled "The Canada Revenue Agency, Tax Avoidance and Tax Evasion: Recommended Actions". It is certainly worth reading.
The Committee recommendations are:
Recommendation 1 The Minister of National Revenue conduct a comprehensive review of the advance tax ruling process. As part of that review, the Minister should identify ways in which efficiency and timeliness could be improved, costs could be reduced and effectiveness could be increased. This review should be completed by 31 March 2017.
Recommendation 2 The Minister of National Revenue require tax advisors operating in Canada to register all of their tax products with the Canada Revenue Agency.
Recommendation 3 The Canada Revenue Agency conduct a comprehensive review of its Voluntary Disclosures Program. As well, it should review the guidelines that are used to determine whether to pursue litigation or to seek a settlement with individuals or organizations that have engaged in tax avoidance or tax evasion. These reviews should be completed by 31 March 2017.
Recommendation 4 The Minister of National Revenue strengthen protections for individuals under the Informant Leads Program and the Offshore Tax Informant Program. As well, the Minister should ensure that these programs are properly incentivized and that all credible information that is obtained through them is properly investigated.
Recommendation 5 The Minister of National Revenue report to the House of Commons Standing Committee on Finance regarding the progress of audits in relation to the “Panama papers.” The report should be made before 1 June 2017.
Recommendation 6 The Canada Revenue Agency enhance its technical, human resource and other capabilities in respect of – and knowledge about – domestic and international aggressive tax planning.
Recommendation 7 The Minister of National Revenue ensure that the Canada Revenue Agency calculate Canada’s federal tax gap on an ongoing basis. As well, the Agency should make information about the size of that gap, and the methodology used to calculate it, publicly available.
Recommendation 8 The federal government, in an effort to reduce complexity and any inequities that distort behaviour and can lead to tax avoidance or tax evasion, accelerate its review of the Income Tax Act and expeditiously implement initiatives aimed at simplifying the income tax system. This review should be completed by 30 June 2017. The House of Commons Standing Committee on Finance should study those initiatives and any resulting proposed legislative amendments as part of its planned review of the Act.
Recommendation 9 The federal government take steps to improve coordination between the Canada Revenue Agency, which investigates situations of possible tax evasion, and the Department of Justice, which prosecutes cases of tax evasion.
Recommendation 10 The Minister of National Revenue, by 31 August 2017, establish a regular reporting program for the Canada Revenue Agency that would facilitate the public availability of statistical information about enforcement efforts in relation to tax evasion and tax avoidance schemes. The reporting program should identify the number of investigations leading to convictions or settlements, and associated penalties and interest rates, as well as enforcement efforts in relation to high-risk individuals and corporations.
Recommendation 11 The federal government review the 92 tax treaties and 22 tax information exchange agreements to which Canada is a party in order to ensure that they do not facilitate non-compliance with tax laws, particularly with respect to the secrecy associated with certain jurisdictions and their banking practices. This review should be completed by 31 August 2017.
Recommendation 12 The Minister of National Revenue address offshore non-compliance with tax laws through greater collaboration with other jurisdictions, including through enhanced joint audits with tax treaty partners.
Recommendation 13 The Canada Revenue Agency take a lead role in ensuring global implementation of the recommendations by the Organisation for Economic Co-operation and Development and the Group of Twenty in relation to their Base Erosion and Profit Shifting Project.
Recommendation 14 The Minister of National Revenue conduct a broad-based review of the Canada Revenue Agency’s code of conduct for current employees and employees who are leaving the Agency. This review should be completed by 31 March 2017.
The NDP provided a Supplementary Report with a number of recommendations:
Recommendations Canada Revenue Agency’s efforts to combat tax avoidance and evasion
Recommendation 1 That the federal government quantitatively and qualitatively reassess its tax information exchange agreements, particularly with regard to the lifting of banking secrecy.
Recommendation 2 That the Auditor General launch a study on Canada Revenue Agency operations, including: (a) the efficiency of the voluntary disclosure program; (b) the consistency of the protocol that sets penalties; (c) the efficiency of tax treaties and tax information exchange agreements; (d) the relationship between the Agency’s auditors and accounting firms.
Recommendation 3 That the Canada Revenue Agency expand its efforts to prosecute tax experts that create aggressive tax planning schemes and commit to tougher penalties.
Recommendation 4 That the Information Commissioner and Privacy Commissioner launch a study on Canada Revenue Agency operations, including the level of transparency required to ensure the accountability of the Canada Revenue Agency, with regard to privacy protection.
Recommendation 5 That the federal government amend the voluntary disclosure program to account for penalties that no longer exist, drawing on the American programs: Offshore Voluntary Disclosure Initiative (OVDI) and Streamlined Filing Compliance Procedures (SFCP).
Recommendation 6 That the federal government examine and measure, as accurately as possible, Canadian tax loss resulting from the use of tax havens and international tax evasion, to determine the federal tax gap.
Recommendation 7 That the federal government enact legislation requiring tax experts and accounting firms to register all fiscal products with the Canada Revenue Agency, as is the case with the Internal Revenue Service in the United States.
Recommendation 8 That the federal government take steps to improve coordination between the Canada Revenue Agency, which investigates possible tax evasion, and the Department of Justice, responsible for prosecutions.
Recommendation 9 That the government ensure that the Canada Revenue Agency stop the systematic negotiation of reduced penalties for tax evaders under the pretext of reducing costs to the justice system, depriving Canada of jurisprudence and creating a regime in which law enforcement becomes the subject of bargaining.
Recommendation 10 That the government launch an independent study on Canada Revenue Agency investigations into cases of tax avoidance or evasion, to determine the number of investigations that result in convictions or settlements, as well as the penalties and interest rates imposed.
Recommendation 11 That the federal government re-examine paragraph 5907(11) of the Income Tax Regulations that allows Canadian companies to transfer assets into tax havens before repatriating them without paying taxes, in cases where the country in question negotiated a TIEA with Canada.
Recommendation 12 That the Office of the Conflict of Interest and Ethics Commissioner launch an investigation into unusual hospitality practices by members of the Canada Revenue Agency’s senior management.
Recommendation 13 That the federal government clarify professional secrecy status in accounting firms, because tax avoidance mechanisms developed and proposed by accountants (without official professional secrecy) often seem to fall under the status as soon as they are reviewed by a lawyer from their own firm.
Recommendation 14 That the government establish an all-party special parliamentary committee on tax evasion, tax havens and aggressive tax avoidance to: (a) assess the scope of the problem, including related issues such as transfer pricing, tax treaties, tax information exchange agreements; (b) study possible government action on the global stage; (c) report its findings and recommendations to the House of Commons by December 1st, 2018.
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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.