Liberal MPs are accusing Canada Revenue Agency executives of cracking down too hard on average taxpayers while quietly reaching deals with well-off Canadians who can afford high-priced lawyers and accountants.
CRA commissioner Andrew Treusch and his top officials responsible for offshore tax enforcement were grilled on Thursday by MPs on the House of Commons finance committee as part of a review of the agency's enforcement approach.
Much of the discussion focused on the CRA's continuing investigation of what it calls the "KPMG offshore tax scheme," in which the global accounting firm helped 27 wealthy individuals move money to the Isle of Man as a way to avoid Canadian taxes.
A KPMG executive testified earlier this week that the service was provided for an average fee of about $100,000, and that the firm largely phased out the program in 2003.
The members of the governing caucus criticized the CRA even though the March 22 Liberal budget gave the agency a vote of confidence, providing an extra $444.4-million to improve tax enforcement. The budget projected that these efforts would raise an additional $2.6-billion in revenue over five years. The CRA described that estimate as "conservative" on Thursday.
Officials refused to confirm directly on Thursday that the agency has reached out-of-court settlements with some people connected to its KPMG investigation. However, the agency released a summary review of its actions conducted by Dalhousie University law professor Kim Brooks that concludes it acted appropriately and that it is "normal" for it to resolve disputes out of court after weighing the potential cost and time of further litigation.
Several Liberal MPs challenged that argument.
Jennifer O'Connell, who represents Pickering-Uxbridge, said she has "very serious concerns" about how the CRA treats average taxpayers. She said single mothers in her riding are being forced to hand over their low-income government support payments because of disputes with the agency over relatively small amounts of owed taxes.
"If the determination [of whether to settle] is based on hours in court or accountant fees, how would the average Canadian who can't afford a $100,000 fee to KPMG, how is that a fair treatment across the board for all taxpayers?" she asked.
Mr. Treusch said all Canadians can get settlements, regardless of income. "We've been emphasizing that if a taxpayer has a debt beyond their means to pay, please come talk to us. We're happy to work out some resolution. These are available to all taxpayers."
Brampton East Liberal MP Raj Grewal also challenged the CRA on the suggestion that average Canadians receive the same treatment as high-income taxpayers.
"It's the perception that they're getting a better deal than the truck driver, the taxi driver, that's being audited for their receipts, gas receipts and stuff like that," he said. "People are very concerned when the CRA picks up the phone and starts reviewing their file. I think that's where the heart of the issue is."
Mr. Treusch also said the agency is trying to do more assisting and less auditing of small businesses while increasing the auditing focus on large international companies.
He said the KPMG case is continuing and that it has led the agency to conduct a "blitz" of 800 tax files connected to the Isle of Man.
"We do not characterize the KPMG file as an amnesty," he said. "This matter remains before the court. We are determined to continue to get all of the participants in this scheme and we want our day in court. Our work is not done."