Revenue agency auditors are being outgunned by tax giants: union

·4 min read
Debi Daviau, president of the Professional Institute of the Public Service of Canada, says professionals who work for the Canada Revenue Agency need better organization and the right tools to crack down on offshore tax evasion. (Ashley Burke/CBC News - image credit)
Debi Daviau, president of the Professional Institute of the Public Service of Canada, says professionals who work for the Canada Revenue Agency need better organization and the right tools to crack down on offshore tax evasion. (Ashley Burke/CBC News - image credit)

Canada Revenue Agency officials are being "outgunned" by "tax giants" when it comes to cracking down on offshore tax cheats, the head of the union representing CRA auditors told members of Parliament Thursday.

Debi Daviau, president of the Professional Institute of the Public Service of Canada (PIPSC), said her members are passionate about their jobs but they need a better structure and the right tools to do their jobs.

"Our CRA professionals are amongst the best in the world at what they do but they face great challenges," Daviau told member of the House of Commons finance committee. "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 outgunned by those trying hardest to avoid taxes."

Daviau said the CRA unit that specialized in highly complicated international tax avoidance and evasion structures was broken up several years ago and its members were reassigned to other, more generalized groups.

"That has reduced the capacity of employees at the CRA to be able to deliver on getting international tax avoiders to pay their fair share," she said.

As a result, Daviau said, CRA has better resources for catching tax cheats within Canada than for pursuing those who have set up elaborate international tax avoidance schemes.

'Precarious positions'

"Employees at the Canada Revenue Agency are up against tax giants," she told MPs. "These are people who have immense skill, technology, expertise and other big companies on their side, so they need to be on a level playing field."

Daviau said an important step in improving the situation would be to enshrine better protection for whistleblowers.

"CRA officials are frequently put in precarious situations where they are asked to hold powerful players to account in a high-stakes setting," she said. "Whistleblower protection is crucial to ensuring professional integrity is paramount during the tax assessment process."

The government should curtail practices such as transfer pricing — which sees companies declare the profit on products in low-tax jurisdictions that had little to do with production — and implement the beneficial ownership registry promised in the recent budget, Daviau added.

Thursday's hearing came after CBC's the Fifth Estate and Radio-Canada's Enquete reported earlier this year that shell companies set up in the Isle of Man are suspected of involvement in a massive fraud scheme. The scheme cost some investors — like Quebec resident Janet Watson, who recounted her story to the committee — much of their life savings.

Janet Watson, who lost money in the Mount Real fraud, wants politicians to reopen an inquiry into Isle of Man shell companies after a Fifth Estate/Enquête investigation exposed links to the massive offshore fraud.
Janet Watson, who lost money in the Mount Real fraud, wants politicians to reopen an inquiry into Isle of Man shell companies after a Fifth Estate/Enquête investigation exposed links to the massive offshore fraud.(Radio-Canada)

Some experts believe KPMG may have had a hand in creating those companies — something the company denied repeatedly Thursday.

"Any implication that KPMG had anything to do with the CINAR fraud is false," Lucia Iacovelli, Canadian managing partner for tax and legal for KPMG, told the committee. "Any implication that KPMG was in any way involved with the sword companies is also false."

Iacovelli said corporate services companies often supply the names of directors and officers for companies they set up for different clients.

Iacovelli said repeatedly that KPMG has not set up any new Isle of Man offshore structures since 2003 and has turned over information about its offshore structure, and the clients for which it was set up, to the CRA.

MPs like NDP MP Peter Julian and Bloc Québécois MP Gabriel Ste-Marie made it clear, however, that they have a long list of questions they will be asking KPMG to answer in writing.

Senator Percy Downe, who has doggedly followed the question of offshore tax avoidance and evasion over the years, said other countries are doing a better job than Canada in investigating the tax evasion revealed by leaks like the Panama Papers.

Downe recommended the parliamentary budget officer be empowered to measure the tax gap between what is actually being collected and what taxes should be paid. He said the government should make it a criminal offence to fail to declare an overseas bank account, implement plans for a public registry of beneficial owners behind companies, and boost the salaries of CRA experts to reduce the number being recruited to work for companies aiding tax avoidance.

Thursday's hearing was the first step in what Julian said will be a renewed push to look at the impact of offshore tax avoidance on Canada and to come up with recommendations.

The finance committee will now turn its attention over the next few weeks to the omnibus budget implementation bill — but Julian said he expects the committee to return after that to the probe of tax avoidance and evasion.

Julian said he did not know how far the committee will get before Parliament is scheduled to rise for the summer the week of June 21.

Elizabeth Thompson can be reached at elizabeth.thompson@cbc.ca.