Tuesday, July 5, 2016

More On Corporate Tax Evasion

The other day I posted some letters from The Star about corporate tax dodging and evasion as revealed by the Panama Papers, and included my doubts that Justin Trudeau will do anything to remediate the situation. An anonymous commentator took me to task:
You never miss a chance to attack Justin Trudeau do you? None of the people in the letters say anything about Trudeau so where are you getting that from?
I replied:
I am drawing that tentative conclusion from a couple of troubling indicators, Anon. One, there has been no government expression of opposition to the CRA's policy of shielding the identify of corporate tax dodgers (usually they are allowed to pay their back taxes in anonymity, as opposed to the small taxpayer being named and shamed on the CRA website) and two, Trudeau is a big enthusiast of free trade deals whose main benefits accrue to corporations, not ordinary Canadians. As well, during the campaign, he talked about tax fairness but not a word about increasing tax rates for corporations. Indeed, in May of 2015 he even opined about lowering those rates if Americans do so. All signs point to a man quite disposed to continuing the absurdly favourable treatment business currently enjoys.
Today's lead letter in The Star once more shows that I am hardly alone in being suspicious of our 'new' government's desire to rein in this egregious corporate theft:
Expose tax cheats, Editorial June 28
I’m finding your ongoing Panama Papers series on tax cheating most informative, as well as anger-provoking over the massive robbery of the public purse for decades, and — in one respect at least — puzzling.

My confusion arises from the fact that there seem to be two forms of theft involved: legal tax avoidance, made possible and encouraged — as you’ve reported — by government tax legislation, dating back decades, that leaves vast loopholes through which the very rich can drive truckloads of money into a series of tax havens around the world, thus avoiding their fair share of taxes at home; and then there is tax evasion, which has always been illegal.

I have read and saved every article in your series and, if there is a clear dividing line between legal avoidance and illegal evasion, I have seen nothing to explain that difference. In fact you’ve even lumped the two together as “tax dodging,” which further muddies the waters.

At this point it’s not clear to me whether the federal government intends to pursue avoiders or evaders — or both. Clearly, they can’t go after the former unless they change our laws to make “avoidance” illegal. But, as Marco Chown Oved reported on June 17, after eight months in office the Trudeau government, despite election campaign promises, “has done nothing to staunch the bleeding” that its predecessors made legally possible.

I’ve seen estimates as high as $31 trillion for the world-wide total stashed in tax havens by corporations and the 1 per cent (I’m betting that’s a conservative estimate). But, as your editorial notes, the only people Ottawa continues to “name and shame” to date are “dozens of small-time offenders . . . who have merely fallen behind on their tax payments.” The really big cheaters, even if caught, can apparently cut themselves a deal and stay anonymous under our laws.

We need tough new laws to ensure that everybody pays their fair share toward the building and maintenance of the strong public sector without which no democracy can survive. I’ll believe the Trudeau government is serious about this when I see that at least some of the very rich corporations and individuals, who have for years defrauded the country that made them wealthy, have been: named; required to pay it all back; heavily fined in addition; and deposited in their rightful onshore residence — behind bars.

In the meantime, talk is just talk and our health, education and infrastructure needs, among other essentials, continue to be woefully underfunded.

Terry O‘Connor, Toronto


  1. Hi,Lorne. There is a grey area betwixt and between evasion and avoidance, an area in which, if you want to play, you'll need some very high priced, professional help. I've often wondered whether it wasn't left so wide and murky deliberately but those who can navigate the minefield can emerge well rewarded for their efforts. It seems to encourage the professionals to reach ever higher as we saw in the KPMG/Isle of Man scheme that, among other things, was pitched as a vehicle to dodge the tax man and an angry spouse alike. The schemers even gamed the 7-year limitation on tax recovery into their package. It wasn't crafted to merely avoid triggering laws but to defeat them entirely by carefully orchestrated means that, IMO, seemed to cross over into criminality.

    I've got it, something that would appeal to social conservative Tories. Mandatory minimum jail sentences for tax avoidance/evasion schemes in excess of, say, $250,000 (give the punters a small break). 1-year for each $250,000. Plus penalties triple the amount unlawfully concealed. Really put the boot in. And, while they're at it, a clear, razor-sharp distinction between avoidance and evasion with rules to monitor the no-man's land.

    1. I like your prescription for rectification, Mound. However, I doubt the day will ever come when the well-placed will ever have to truly account for their fiscal sins. Sure, we will occasionally get the equivalent of Stalinist show trials for a few like Bernie Madoff, as if that should satisfy the masses' yen for fairness.

      I am also reminded of the duality of tax rules in the recent 'settlement,' engineered out of the public eye, between our Lord Black and the CRA. Apparently he just couldn't accept the levy against him, so Revenue Canada negotiated with him and settled to Black's satisfaction. No details, of course, for public consumption.

      Let one of the "little people" try that one, eh?