Over the past six years, three different parliamentary budget officers — mandated to report to parliament on matters of fiscal importance — have requested federal data to calculate the difference between taxes due and those actually collected.

The records required to find the figure — called the tax gap — never came.

Dozens of pages of correspondence between the parliamentary budget officers and Canada Revenue Agency (CRA) officials, obtained by a Toronto Star/CBC investigation, detail a five-year battle for data that has now concluded in a stalemate — and no information shared.

“It is disappointing,” says Jean-Denis Fréchette, Canada’s current parliamentary budget officer, sitting with a large stack of paper and folders in his Ottawa office, evidence of the five-year tug-of-war with the CRA. “It can go on and on and there’s no way out at one point, if you don’t have a full team of lawyers negotiating something with CRA.”

Eventually, the PBO “had to walk away” Fréchette said. “We had legal counsel, they had legal counsel. One said we should have access and the other said no . . . At some point you say, ‘Do we keep negotiating?’ ”

For more than 50 years, the U.S. has measured and publicly reported the country’s tax gap. The U.K. began doing the same in 2009, annually detailing the amount of taxes — from both domestic and offshore sources — that never make it into the country’s tax coffers.

In all, more than a dozen Western countries — including Australia, Sweden, Poland, Belgium, Portugal, Mexico and Denmark — measure their uncollected taxes in order to understand the size of their shortfalls and plot public policy strategies to address the problem.

Canada lags.

Even as the federal Liberals invested $1 billion over the past two years in rooting out offshore tax evasion, the government has never conducted a comprehensive calculation of the size and scope of the offshore tax collection problem it seeks to correct.

In Canada, the country’s overall tax gap — including the billions lost offshore — remains a known unknown.

Diane Lebouthillier, the federal minister of national revenue, declined interview requests for this story. In a statement, a ministry spokesperson wrote that the integrity of the tax system and the confidence of Canadians “are of utmost importance to the CRA,” and that while the agency “worked with the PBO to identify data it could legally share,” there were privacy concerns around information related to individual Canadians.

“Generally speaking, the PBO has the authority to obtain financial or economic data from government departments. However, this does not supersede the confidentiality protection provided for in Section 241 of the Income Tax Act.”

Mark Mahabir, general counsel for the PBO, says his agency challenged that interpretation, arguing that it only ever wanted anonymized data that allowed for a broad tax gap calculation.

“Our position is that we work for Senate and the House of Commons so they should give it to us,” he says. “They said, ‘We will give it to you, but it will cost a lot of money,’ and then they moved back to the old position (of denying the records).”

Last year, the CRA published a report about GST tax losses, concluding that about 5.6 per cent in potential revenues went uncollected every year from 2000 to 2014. Earlier this year, the agency released a report saying Canada forfeited $8.7 billion in 2014 domestic taxes as a result of unreported underground economy income and unpaid taxes.

But those reports ignored the white elephant in the room: uncollected offshore taxes fuelled by the billions flowing out of the country and often into foreign tax havens.

That offshore chunk, say experts, should be the government’s tax gap focus.

“They’ve just gone for the low-hanging fruit and left the important matters alone,” says Liberal Senator Percy Downe, a vocal advocate for tax gap reporting in Canada.

The best guesses from credible sources place Canada’s tax losses to offshore havens at between $6 billion and $7.8 billion each year.

But those estimates are theoretical. And that means public policy is being made in a knowledge vacuum, says Frechette.

“The measurement of this gap is . . . showing to Canadians and parliamentarians who are making these decisions that there is a serious problem in terms of collecting that money or protecting the tax collection system of Canada,” he says. “That’s what other countries are . . . saying as well. It’s not only the value of the billions of dollars that you can collect, it’s to measure it and do something, improve your system.”

Methodologies differ among agencies that conduct their own analyses. For example, the U.S. Internal Revenue Service — which most recently estimated a gross tax gap of $458-billion (U.S.) based on averages from 2008 to 2010 — uses a different formula than U.K. tax authorities — which estimated a tax gap there of £34-billion in 2013-14.

The Paradise Papers is the second major leak in two years showing how billions of dollars flows out of countries and into offshore tax havens, sheltering the money from domestic tax authorities.

Last year, the Liberals directed $444 million to the Canada Revenue Agency aimed at rooting out offshore tax evasion. The government’s 2017 budget earmarked another $523.9 million over the next five years to prevent tax evasion and improve tax compliance with a focus on wealthy individuals and multinational corporations.

In its written statement, the government says those investments in tax evasion detection have been aggressive and effective including more than 990 audits and more than 42 criminal investigations.

As well, the ministry has levied more than $262 million in penalties against promoters and tax preparers between April 1, 2003 and March 31, 2017, “who advised their clients to participate in aggressive tax arrangements, plans or schemes.”

“Measuring the tax gap will assist the government in determining if the Canada Revenue Agency needs $444.4 million or $777.7 million to fight overseas tax evasion,” said Downe. “Without the tax gap information, they are only guessing at the resources they require.”

Downe began agitating for tax gap transparency in 2012, asking then parliamentary budget officer (PBO) Kevin Page to investigate the impact of overseas tax evasion. Page concluded it was both possible and valuable. He committed his office to developing the methodology in co-operation with the CRA.

That didn’t happen.

The CRA’s initial response was succinct: “The CRA does not generate information or data on the ‘tax gap,’ ” wrote the then deputy commissioner of revenue in response. “The CRA is not aware of a recognized or reliable methodology for determining the ‘tax gap.’ ”

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A month later, Page returned with a request for data that would allow his office to calculate the tax gap based on methodologies used by the U.K. and the U.S.

“I am open to your recommendations regarding the best method by which these data could be shared with my office,” Page wrote.

No data was provided.

“Unfortunately, CRA has informed us that they are unable to share any relevant data with my office,” Page wrote to Downe on March 2, 2003. Page did not respond to interview requests for this story.

Page’s interim successor, Sonia L’Heureux, renewed the PBO request for CRA data in June 2013, offering to have her office compensate the CRA “for the reasonably incurred expense of preparing the required data” or be given access to the data to prepare it itself.

In response, CRA Commissioner Andrew Treusch dismissed the value of the exercise, saying the figures are produced at “high cost” and cannot be compared across jurisdictions because of varying calculation methods.

“While the CRA can provide you with the requested data, I would like to reiterate that this data will not advance public understanding of the tax gap.”

Frechette became the third parliamentary budget officer to press for the data when he took the office in late 2013.

Correspondence shows lengthy discussions over the CRA’s $141,000 fee estimate and six-month timeline.

Frechette’s concerns about the quality of anonymized and aggregated data led to a legal standoff for much of 2014 and 2015.

An April 2015 letter from the CRA to Frechette reads: “Our position is that the PBO does not have the authority to access confidential taxpayer information.”

Frechette suggested taking the matter to Federal Court for a resolution, Treusch replied: “The CRA declines . . . In our view, the legal position relating to your request is clear and unambiguous. Given this, there is no value in seeking further clarification.”

“It was a dead end,” says Frechette. “We decided that . . . there was no point to continue the negotiations.”

After the Liberals took power in 2015, Lebouthillier, newly named as national revenue minister, wrote to Downe that her department has “strong interest in measures of tax evasion and avoidance both domestically and internationally,” and that it would undertake a “comprehensive study of tax gap estimation.”

Downe was unsatisfied, believing the time for studying methodologies already well-established was over. He appealed directly to Prime Minister Justin Trudeau last year.

“Rather than studying the tax gap itself, CRA proposes to study the idea of studying the gap,” Downe wrote. “Calculation of the tax gap is the very embodiment of (the Liberal Party’s) commitments . . . For years, the Canada Revenue Agency has acted in flagrant disregard of the letter and spirit of the mandate of the Parliamentary Budget Officer. Good information is the foundation of good policy and your leadership is vital to rectifying this problem.”

There has been some movement.

In April of last year, the House of Commons Standing Committee on Finance recommended the CRA calculate the country’s federal tax gap “on an ongoing basis” and make that information, and the methodology, public.

In response, Lebouthillier wrote that the government supports this idea, committing to explore methodologies and better understand “the benefits and drawbacks of tax gap estimation.”

There remains skepticism.

“I think it will be a one-off,” says the PBO’s general counsel Mahabir. “They aren’t going to publish a co-ordinated figure incorporating all of it together.”

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