VANCOUVER – New measures in this week’s federal budget targeting tax cheats are aimed at wealthy Canadians who are using schemes with “complicated names” to hide their money from the government, Finance Minister Jim Flaherty said Friday as the federal Conservatives started the task of selling their latest fiscal plan.
Flaherty released his budget a day earlier, promising to balance the country’s books by 2015, in part by hounding tax cheats for hundreds of millions of dollars.
“It’s apparent that there’s still substantial tax avoidance and tax evasion and some of it through quite sophisticated methods — by relatively wealthy people — that have complicated names,” Flaherty said after a speech to Vancouver’s Board of Trade.
“It’s not asking anyone to do anything but comply with the Canadian tax laws and pay their fair share. If people don’t pay their fair share, then it’s very difficult to keep taxes low.”
The 2013-14 budget anticipates that closing tax loopholes and chasing tax cheats will rake in half a billion dollars this year and rise to $1.3 billion the year after.
To do that, the budget includes a long list of measures such as stricter rules for tracking large financial transactions abroad; changes that will make it easier for the government to obtain information from banks; new penalties for using or distributing software designed to cook financial records; and rewards for people who turn in tax cheats — so long as the people coming forward with that information aren’t tax cheats themselves.
The changes will be administered by the Canada Revenue Agency, which itself is absorbing a $19-million budget cut this year and another $58 million in 2014.
Flaherty said the impact of the tax changes was calculated by the Canada Revenue Agency, which was able to estimate the savings of closing certain loopholes.
The impact of some of the tax measures has yet to be calculated, Flaherty said, because it’s difficult to know for sure how effective the rules will be in ferreting out tax cheats.
“It’s very substantial amounts,” he said.
“We don’t put any numbers in the budget, in terms of tax revenues, unless the Canada Revenue Agency is satisfied. They have some information on these.”
The 2013-2014 budget predicts the federal deficit will fall to $18.7 billion this year, before dropping to $6.6 billion in 2014-15 and completely vanishing by 2015-16, leaving the Conservative government with a balanced budget in time for that year’s scheduled election.
The budget also includes a skills-training grant program, which is already facing skepticism from some provinces and outright hostility in Quebec, as well as continuing cost-cutting measures that were introduced last year.
The federal government is betting the economy will improve in the coming years, with nominal growth — output gains plus inflation — projected to hit 4.7 per cent in 2014 and stay there in 2015. Compare that to the two previous years, estimated to be at 3.1 and 3.3 per cent respectively.
If those projections hold, the federal government will see tax revenues increase by 5.4 and 6.4 per cent in 2014-15 and 2015-16, respectively.
On Friday, Flaherty insisted those projections were modest.
“We rely on the average of the private-sector economists, and they agree that the average of their estimates were reliable,” said Flaherty.