On 24 April 2012, the House of Commons Standing Committee on Finance (the Committee) adopted a motion to resume its study on tax evasion and also to examine international tax planning in order to ascertain emerging best practices in foreign jurisdictions for combatting tax evasion. The original motion, which was adopted by the Committee on 4 October 2010 in the 40th Parliament, required an examination of the use of offshore accounts by Canadians to evade taxation, the efforts made by the Canada Revenue Agency (CRA) to recover unpaid tax and Canada’s strategy for combating tax evasion.

Canada has a self-assessment tax regime, which requires taxpayers to determine their taxable income. One of the difficulties with this approach is that taxpayers may not disclose all of their income, especially if it is located outside of Canada. Taxpayers may also use certain provisions in the Income Tax Act (ITA) in a manner that was not intended when the provision was enacted. According to some analysts, these types of activities have reduced Canada’s tax base. Furthermore, the ease with which assets and funds can be transferred in the global economy has facilitated legitimate, as well as illegitimate, activities in certain jurisdictions.

This report examines tax avoidance and tax evasion in Canada, as well as the methods used domestically and internationally to detect and prosecute — and thereby reduce — aggressive tax planning so that taxpayers pay their fair share of tax. Chapter 1 examines the magnitude of tax avoidance and tax evasion in Canada, and the international response to tax avoidance and evasion. Chapter 2 describes the types of criminal activities and aggressive tax planning strategies that may be used by individuals and corporations, while Chapter 3 highlights the efforts made by the CRA, and other government and non-government entities, in monitoring, detecting and prosecuting aggressive tax planning and tax evasion. Chapter 4 indicates the methods used by tax authorities to obtain and exchange tax information, while Chapter 5 discusses domestic and international measures to reduce aggressive tax planning and tax evasion. Finally, the Committee’s recommendations are contained in Chapter 6.