MPs and the non-profit Canadians for Tax Fairness are calling for the federal government to take action after a massive global investigation found hundreds of world leaders and public officials have used offshore tax havens to hide enormous fortunes.
“According to the parliamentary budget officer, we lose over $25 billion each and every year to overseas tax havens,” said NDP finance critic Peter Julian. “It's simply an untenable situation when you have the ultra-rich getting away with so much, and so many Canadians struggling with so little.”
Immediately following an election that put issues of affordability and tax fairness front and centre, the Pandora Papers exposed the offshore holdings of 35 current and former country leaders. Nearly two million documents were leaked to the International Consortium of Investigative Journalists, which spent two years examining the documents before releasing the findings on Oct. 3.
Jacques Villeneuve, the only Canadian to win a Formula 1 championship, and Elvis Stojko, an Olympic figure skater, are two well-known Canadians whose offshore companies and trust, respectively, were detailed in the leaked documents.
The Canada Revenue Agency (CRA) declined to be interviewed for this story, but said in an emailed statement it “has begun identifying how to integrate Pandora Papers information with data it already possesses.” The agency is “working with our international partners to pool resources and share information to develop an accurate picture of what the data is telling us.”
The CRA also notes that holding offshore assets doesn’t automatically imply tax non-compliance.
Support for tax fairness in Canada appears overwhelming. Eighty-nine per cent of Canadians want to see a wealth tax of one per cent paid by the richest Canadians as part of the country’s pandemic recovery, according to a recent Abacus Data poll based on the NDP’s 2021 platform, and 92 per cent support closing tax loopholes and making it harder for corporations to strategically book profits in tax havens.
NDP to continue its push for tax fairness
The NDP has long been a champion for tax fairness and income equality, and last November introduced an opposition day motion to implement a one per cent tax on wealth over $20 million and an excess-profits tax on “big corporations profiteering from the pandemic.” The motion was defeated 292-27, with the Liberals, Bloc Québécois, and Conservatives voting against it.
This term, Julian said the NDP will continue to push for tax fairness despite being “faced with a block of majority parties, Liberal and Conservatives that are absolutely opposed to having the ultra-rich pay their fair share.”
In a meeting with the Standing Committee on Finance in June, the CRA admitted there has not been a single prosecution to come from its recent efforts to combat tax evasion by the super-rich.
Julian said the revenue agency was “very clear” in committee that it has neither the legislative nor financial tools to crack down on the rampant use of tax havens.
Deep cuts to the CRA’s funding in the Harper era undermined its ability to investigate and ensure compliance with tax regulations, explained D.T. Cochrane, a policy researcher with Canadians for Tax Fairness (C4TF), a non-profit and non-partisan organization that advocates for fair and progressive tax policies. Although Justin Trudeau’s government later increased funding to the CRA, it did not make up for the cuts, he said.
However, in the 2021 election, all five major parties supported increasing funding to the CRA, which gives some experts hope.
“There seems to be universal acknowledgment across the parties that economic inequality is a problem, and it's a problem that requires government action,” said Cochrane.
In a blog post for C4TF, Cochrane outlined policies the major parties could work together on, based on similarities between party platforms, and identified an excess profits tax as one possibility.
The NDP’s election platform called for a COVID-19 excess profits tax, while the Liberals promised to introduce a three per cent surtax on earnings over $1 billion for banks and insurance companies, which Cochrane characterizes as an “unnecessarily narrow implementation.” But if both parties work together, he is hopeful pandemic-derived profits from corporations can be directed back to the government for recovery spending.
MPs, C4TF call for Canada to follow Biden’s lead
Cochrane says the Pandora Papers serve as a reminder the ultra-wealthy will make use of every tactic at their disposal to reduce their taxes.
“Every time there's one of these leaks, we learn a little bit more about the types of schemes that get established,” he said. “Knowing more about them equips the CRA to better respond.”
At the international level, G20 finance ministers and over 130 nations will meet in the coming weeks to finalize negotiations for international corporate tax reforms through the Organization for Economic Co-operation and Development (OECD).
On Oct. 1, 136 countries and jurisdictions signed an OECD agreement to enact a 15 per cent minimum corporate tax rate and impose new rules on technology giants that require them to pay taxes in countries where their goods and services are sold.
“The rise of the digital economy has facilitated the ability for corporations to move assets easily into other jurisdictions, and then claim that that's where their profit is being generated, and avoid taxes in the higher tax jurisdictions where they're benefiting greatly from a lot of the public expenditure while not contributing to it,” said Cochrane.
For example, he said a company could claim that all its profits are derived from intellectual property and its platform, which could be located in a low-tax jurisdiction despite its economic activity taking place in other jurisdictions.
“We want company-level disclosure of where revenues are actually being generated, how much profit is being claimed in those jurisdictions, and then how much in tax they're paying in those jurisdictions,” said Cochrane.
However, the Biden administration is aiming higher and proposed a 21 per cent minimum foreign corporate tax rate.
Green MP Mike Morrice said Canada should be looking at aligning its federal corporate tax rate with the U.S., a call to action shared by C4TF.
“Folks in my community are recognizing that we need to ensure that wealthy individuals and the largest corporations are paying their fair share, and ... recognizing that wealth inequality has only worsened in recent years,” said Morrice, adding it's important to close tax loopholes.
Julian and C4TF both say ending Canada’s double non-taxation agreements with tax haven countries is a concrete step the Canadian government can take immediately to remove one of the mechanisms used in complex tax avoidance schemes. Doing this would ensure income derived from assets in tax havens is subject to a substantial minimum income tax rate, Cochrane explained.
Cracking down on money laundering
Another action item the NDP and C4TF have been pushing for is to create a publicly accessible beneficial ownership registry, which would help combat money laundering in Canada.
In Budget 2021, the Liberals earmarked $2.1 million over two years to Innovation, Science and Economic Development Canada for the implementation of a publicly accessible corporate beneficial ownership registry by 2025.
Julian said the Liberals haven't allocated nearly sufficient resources to achieve this.
Canadians’ widespread support for a wealth tax and tax fairness is indicative of the massive inequalities we see today, said Julian, adding he sees constituents struggling to keep a roof over their heads and food on the table.
“I think that frustration is now reaching a boiling point, and we need to start seeing real action from our government,” he said. “The NDP will be pushing with our 25-member caucus to get the government to act.”
Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer
Surprise, surprise! I guess
Surprise, surprise! I guess not. Anyone interested in this subject has known for years that tax havens must exist. Damn right the wealthy individuals and corporations should pay their fair share. They have become wealthy and maintain their wealth by making sure that the working poor remain poor. Hire casuals so benefits don’t have to be paid, keep hours low, export jobs to third world countries where labour and environmental laws are nearly nonexistent. Hide your wealth. I am so tired of mealy mouthed politicians that make promises and never deliver. Trudeau and his constant apologies makes me think of a little boy with his hand in the cookie jar who constantly says he is sorry but has no intention of stopping his cookie jar raids. The world needs leaders with both morals and guts, not people who are only in it to protect their own greedy interests and the others that are like them. Their version of the Golden Rule is do unto others just like me what I would have people everywhere do unto me. After all I worked hard for my wealth so why should I have to pay my fair share. Well guess what. The working poor work probably much harder than you just to stay afloat.
I know that most people who
I know that most people who are working for the CRA are honest and dedicated, but my impression from this and many other stories is that the CRA has become yet another example of a "captive regulator", with the rot spreading from the top down.
Senior people in the department - especially legal specialists - become aware that if they go easy on the super-wealthy and powerful, then based on their connections and insider knowledge they can retire early, and set themselves up with very lucrative future jobs in the industry they were supposed to have been regulating.
There should be an effective "wall" in place to prevent this, but there isn't. Because guess who is supposed to set up the wall, and who benefits by its absence? Same people.
Similar scenario with energy, especially fossil fuels. Same story with environment and health and food and drug oversight and "regulation" by government.
By Occam's Razor, this becomes the most plausible explanation for why all these scandals keep coming out of so many government departments year after year (or decade after decade), and yet nothing ever really gets done.
On the one hand, the wealthy,
On the one hand, the wealthy, who get that way and stay that way on the basis of governments' largesse (in terms of subsidies, low-interest loans, guarantees, acquisition of publicly funded assets at bargain-basement prices), and legislators' willingness.
Unlike the middle, working and poor classes, the wealthy can buy legislated tax breaks, exemptions, deferrals ... and when they're caught cheating, no one even makes them pay the amount they skipped paying: no-no-no-no-no) government approaches it from the perspective of, "tell us how few pennies on the dollar you'd be willing to settle at."
The CRA is very good at sticking it to welfare moms, to poor disabled people, and long after assessment, clawing money back by applying made-up rules.
If you're a really, really "little guy" and manage to get back money they scooped when they oughtn't to have, be assured of audits virtually every year thereafter till they get tired of annoying you.
For that reason, I'd humbly suggest to whomever doles out the bux, that they spend a significant part of it educating line workers, supervisors and managers.
I dunno about "tax fairness." I could write a book about tax *unfairness* though ...