Budget numbers don’t add up: critics

Flaherty blasted for $250M cut to tax agency

OT TAWA • The Conservative government is facing mounting questions over its budget arithmetic and how it will increase efforts to combat tax evasion while cutting more than $250-million from the Canada Revenue Agency over the next few years.

Opposition parties say the Tories’ math doesn’t add up and think the government is trying to look busy on the issue in advance of the G8 leaders’ summit in June that will focus on international tax evasion.

Finance Minister Jim Flaherty pledged in last week’s budget the government will bolster its efforts to fight offshore tax evasion, including launching a whistleblower line that pays rewards for tips, improving compliance programs and demanding more information on certain financial transactions.

The Harper government expects the new measures will generate more than $2-billion in additional revenue over the next five years to help balance the books.

However, the government also announced in the budget it will chop another $61-million annually from the CRA by 201516, bringing total cuts from the last two budgets to more than $250-million over the next few years.

“They’re trying to do everything on the cheap,” said Liberal Senator Percy Downe, who’s leading the fight in Parliament on tax evasion. “They’re not doing the investment.”

The called the new measures “baby steps.”

He’s encouraging the government to invest more resources in the CRA to fight tax evasion, and to finally estimate the tax gap in Canada: the difference between what the government should be collecting in taxes and what it’s actually collecting. Several other countries such as the United States (estimated tax gap of $385-billion) and the United Kingdom (nearly $50-billion) publish a tax gap estimate.

Canadians for Tax Fairness, a domestic advocacy group, estimates international tax havens alone are costing Canada at least $7.8-billion annually, but the number could be much higher.

Alex Seguin, a spokesman for Revenue Minister Gail Shea, said the new cuts announced in the budget are to internal operations and will not erode the agency’s ability to combat tax evasion.

“There will be no impact on CRA’s services or CRA’s audit and enforcement capabilities,” Mr. Seguin said in an email.