Thursday, February 29, 2024

UPDATE: A Lack Of Appetite: The Canadian Government, The CRA, And Tax Avoidance

 

While I have written extensively in the past about tax evasion and avoidance in light of the revelations of both the Panama and Paradise Papers, I felt it was time to do an update. To summarize what I wrote previously, there has been a striking reluctance on the part of our government, compared to other jurisdictions, to go after the entitled who have sheltered so much income in offshore accounts.

Consider, for example, France. as reported in La Monde.
Seven years [after the Panama Papers release] and hundreds of audits later, France has already recovered €195.5 million in tax revenue for the state budget... 
Rendered invisible in offshore arrangements, this money corresponds to 219 taxpayer files, both individuals and companies, caught in the net of the Panama Papers. It's the sum of all financial audits completed by December 31, 2022, as well as regularizations made.

This sum

place[s] France in the club of five countries to have recovered more than €100 million in taxes and penalties thanks to the Panama Papers, along with the UK, Germany, Spain and Australia.

Moreover, the cumulative amount recovered is greater:

All told, from the Offshore Leaks (2013) to the Pandora Papers (2021), the sum recovered today stands at over €450 million. However, this figure will remain incomplete until all checks have been completed.

By contrast, it would appear that the pursuit of tax scofflaws by Canada has been far less vigorous. While is is difficult to find any current reports, two Senate of Canada reports do not paint a rosy picture. The first, from 2019 and written by Senator Percy Downe, has this to say:

The Canada Revenue Agency (CRA) is up to its old tricks: misleading Canadians and not upholding its responsibilities to collect taxes owed to our country by those hiding their money overseas. When tax cheats are not caught, charged and convicted, and money owed isn’t collected, we have less money to invest in our priorities while the rest of us pay higher taxes to make up the shortfall.

Why the federal government allows this state of affairs to continue year after year remains a mystery. The government talks tough, “overseas tax evasion is a high priority”, “we will catch you if you cheat” and other reassuring words. Their results, however, speak for themselves: they have none.

Recently, on the third anniversary of the release of the Panama Papers, we learned that other countries have recovered more than $1.2 billion dollars in fines and back taxes. Australia has recouped $92,880,415, Spain is counting $164,104,468 in their coffers, the United Kingdom has recovered $252,762,000, and even tiny Iceland was able to recover $25,525,959. Some 894 Canadians (individuals, corporations and trusts) were revealed to have accounts in the Panama Papers, but Canada’s Revenue Agency hasn’t recovered a dollar.

A second piece by Downe, written two years later, reported no progress. 

In the immortal words of the Parliamentary Budget Officer, "there are hundreds of millions, if not billions, of dollars in taxes that go undeclared, unreported and that escape Canadian tax authorities, probably on an annual basis...”

The Canada Revenue Agency (CRA) has failed when it comes to collecting any of this money hidden overseas. Notwithstanding the CRA’s highly effective domestic tax collection, they have been an utter disaster on overseas tax evasion. Canadians are allowed to have accounts overseas but it is illegal not to declare the proceeds of those accounts.

This inaction costs all of us, considering how the foregone tax revenue would provide a healthy injection into a myriad of much-needed programs in Canada. 

In Canada, there is no risk to hiding your money overseas because your chances of being charged or convicted range from slim to none. The "hundreds of millions, if not billions, of dollars in taxes that go undeclared ... probably on an annual basis” identified by the PBO will not, by itself, solve our financial problems — but it will go a long way to restore prosperity for Canadians.

The failure to collect taxes owed undermines confidence that everyone is being treated equally. If we are all in this together, then we all pay taxes. Otherwise, there is special treatment for some Canadians with the resources to hide their money, while the rest of us must pay more to make up that shortfall.

There is much work to do. Since nothing else has worked, it’s time for solid action rather than empty words from the Government of Canada.

One is naive to believe that the CRA is truly independent of government influence. One may recall, for example, that Stephen Harper siced it on NGOs that were critical of his government, and despite the promising rhetoric at the beginning of Justin Trudeau's tenure, it is clear that certain entities (think corporate and individual titans) are essentially off-limits. 

I have said it several times here, that Mr. Trudeau has never met a powerful entity he doesn't admire. Perhaps he picked it up through his upbringing or his reported forays to Davos to meet with the world's elite. 

One thing is undeniable, however. His bromance is costing the rest of us plenty, both in terms of a loss of faith in the fairness of our tax system, and the underfunding of programs that could benefit all of us, if only we had access to Canadian elites' tax on their concealed wealth.

UPDATE: The G20 wants to impose a minimum global tax on billionaires. Keir Starmer, Britain's Labour leader, promises no new taxes on the wealthy if elected. I suspect Justin Trudeau shares Starmer's aversion to holding the ultra wealthy to account.

 

 



4 comments:

  1. But the CRA did a great job of tracking down tax-dodging servers in bars and restaurants under Harper! Servers in my favourite pub reported that at least two CRA agents staked out the establishment for, IIRC, 2 or even 4 days, apparently trying to estimate income from cash tips.

    At least one server got a re-assessment got badly hit by a reassessment. She, immediately, hired a lawyer and as she has some fairly well–off parents who were not impressed it might might not have been any easy coup for the CRA

    I am sure this was a good use of CRA resources!

    I wonder if the CRA has the resources and staff to successfully claim the overseas money?

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    1. When it comes to low hanging fruit, Anon, the CRA seems to have a very sharp appetite. You may also recall that not too long ago they wanted Shopfy to turn over the records of all of its merchants to check for tax propriety. https://www.itworldcanada.com/article/shopify-to-fight-cras-request-to-obtain-6-years-of-records-from-canadian-merchants/541786

      Your question about the CRA resources would seem to be answered by the fact that the government gave it over $500 million in extra funding to hunt down tax cheats. Given the lack of results when it comes to offshore accounts, I think we can chalk that announcement up to political theatre, something the Trudeau government seems to excel at.

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  2. political theatre, something the Trudeau government seems to excel at.

    Trudeau is not alone in catering to the rich and influential.
    The practice of taxing the poor to help the rich is a world wide practice.
    My wife was ,years ago harassed by Revenue Canada when she worked a as hair stylist that charged high prices and the rich customers tipped lightly if at all.
    As a self employed, very small business I was contacted late at night by Revenue Canada who demanded payment of an underestimated tax return.
    Demanded would be a polite way of describing their attitude on the phone.
    When I said FU , I dont know who the heck you are your just a voice on the phone they backed off.
    So on goes the masses supporting the rich!
    Do you think for a moment Jimmy Patterson gets a 9.00pm phone call demanding tax payment?

    TB

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    1. We are indeed naive, TB, if we believe that the rules for the entitled are the same as those for the rest of us. The Mound of Sound often wrote about "captured governments,' those in the thrall of the powerful. That is precisely what we see in Canada and so many other jurisdictions, and as long as Canadians keep rewarding politicians with majority, unaccountable governments, nothing will change.

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