Yes. Good morning, Mr. Chair, vice-chairs and members of the committee. I don't know if I should say “Good morning” or “Good afternoon”, but I'll stick with “Good morning”.

Thank you for the invitation to appear before you today to discuss our latest report, “Preliminary Findings on International Taxation”, which was published earlier today.

Today I'm joined by Mark Mahabir and Govindadeva Bernier, who will help in responding to your questions.

Our report presents PBO findings on international taxation. This report stems from the initial request of one of your colleagues in the other House, Senator Downe, in 2012. Following this request, PBO pursued its efforts to estimate the tax gap.

As you may know, the tax gap is the difference between the amount of tax that would be paid if all tax obligations were fully met in all instances and the amount of tax that's actually collected by the tax administration authority.

Part of the tax gap can be attributed to unintentional actions, such as errors, ignorance of relevant tax rules, or inability to comply. It can also arise from intentional actions, such as tax evasion or failure to pay taxes. One part of the tax gap that is not often measured, because of the difficulty of estimating it properly, is that attributed to tax avoidance, which is legal but contravenes the objective and spirit of the law.

Our report examines financial flows between corporations in other countries and those in Canada. These flows and transactions can reduce taxable income in Canada by shifting income and profits to certain jurisdictions, thus reducing the amount of taxes paid by corporations in Canada.

The report provides the magnitude of financial flows and transactions involving jurisdictions that are offshore financial centres, but does not quantify the amount of taxes that could be collected if such practices of profit-shifting were no longer permitted. For example, in 2016 there was a net outflow of funds from Canada of $200 billion to offshore financial centres. Similarly, the total value of all revenue from and expenses to those same jurisdictions by Canadian corporations was $996 billion. If just a small proportion of such transfers and transactions were used to reduce taxable income in Canada, the amount of tax revenue that could be collected would be in the billions of dollars.

Finally, we also examined financial metrics for large multinational corporations with operations in Canada. For example, when total earnings before taxes and revenues were attributed to Canada, based on Canada's GDP relative to the GDPs of the countries in which those multinational companies operate, the attributed revenues and earnings were higher than those reported on Canadian tax returns by those corporations. This suggests that earnings reported in Canada are not commensurate with the economic activity of those corporations in Canada.

Mark, Govindadeva and I would be pleased to respond to any questions you may have regarding our preliminary findings on the international taxation report or other PBO analyses. Thank you.