The View From Olympus

 

As I tried to suggest in my post the other day, rich people really are different from us, and people like Justin Trudeau, part of that rarified group, have no desire to really disrupt their status quo. 

While it might seem reductionist, in my view that fact goes a long way toward explaining the inability of the Canada Revenue Agency to recoup taxes that have been sheltered in off-shore havens. If you believe that the CRA acts without political interference, you need only remember how Harper sicced them on non-profits that were active on environmental issues, often embarrassing the prime minister in the process. The same thing is happening under the Liberal administration; it is just taking a different form.

And people are noticing the CRA's apparent impotence:

Five years, 200 audits, zero charges, Oct. 5

Aside from hearing how the wealthy continue to evade paying taxes in this country, what is even more infuriating is reading about how the Canada Revenue Agency (CRA) does very little to recoup this money or charge these people for this kind of criminal activity … all the while charging hundreds, even thousands of dollars in penalties and fees to small businesses or average citizens for filing our taxes late or not making our payments on time.

Heidi Bigl, Toronto

Heidi Bigl is not the only one. Writes Terry Glavin:

As for Canada’s diligence in capturing tax revenue — it’s not much to boast about. It was only after the ICIJ’s Panama Papers bombshell in 2016 that the CRA dropped a court fight intended to prevent the Parliamentary Budget Officer from releasing estimates on how much the treasury was being effectively bilked out of revenue by individuals and corporations resorting to secret offshore accounts. That was just one minor impact the Panama Papers had on government policies worldwide, but Canada remains a laggard in corporate transparency.

And the same laxity seems to apply to money-laundering:

For years, Transparency International Canada has been campaigning against what it calls “snow-washing,” a kind of money-laundering that allows foreign investors to hide dubiously sourced capital in Canadian assets, notably real estate. It was only earlier this year that the federal government promised to introduce a searchable “beneficial ownership” registry in the House of Commons.

The adverse impacts of snow-washing in real estate is most noticeable in British Columbia, where a provincial expert panel reckoned in 2018 that in that year alone, money-launderers had sunk $5.3 billion into real estate investments, mostly in Metro Vancouver. It’s a racket that’s been going on for years, causing dramatic distortions in the city’s house prices, and it has spurred B.C. to introduce a beneficial ownership registry of its own.

The promise of a federal registry to identify the real owners of corporations investing in Canada was made in the Liberal budget that was introduced in the House of Commons last April. The registry is supposed to come into effect within five years. But a federal election has since come and gone. So will Ottawa finally act to clean up Canada’s reputation and start collecting taxes on the super-rich with the same rigour the CRA applies to the rest of us?

We’ll see.

The view from Olympus can be dizzying, and it is a great height to fall from. Hubris and nemesis, anyone?

But Is There A Will?

I was reading Owen's blog yesterday, in which he cites Robin Sears' view that, as Britain did during WW11, Canada needs to build back better post-pandemic. 

I am a skeptic as to the prospects of that happening. Here is the comment I made:

What I notice most about our current federal government, Owen, is their almost endless capacity for saying the right things, but the enacting of these aspirations seems mired in inertia. Any chance of 'building back better' would surely require a change in the taxation regime, but I don't hold my breath about that one. I read recently, for example, that despite large infusions of cash, the CRA has not prosecuted even one large tax evader, although they have called in a couple of them for 'a good talking to.'

I went back to the article and decided it merits further examination. It offers a devastating indictment, not only of the agency, but, implicitly, the government ethos it is reflecting.

Data from the Canada Revenue Agency shows its recent efforts to combat tax evasion by the super-rich have resulted in zero prosecutions or convictions.

In response to a question tabled in Parliament by NDP MP Matthew Green, the CRA said it referred 44 cases on individuals whose net worth topped $50 million to its criminal investigations program since 2015.

Only two of those cases proceeded to federal prosecutors, with no charges laid afterward.

The lack of prosecutions follows more than 6,770 audits of ultra-wealthy Canadians over the past six years.

It also comes amid a roughly 3,000 per cent increase in spending on the agency’s high-net-worth compliance program between 2015 and 2019 due to a beefed-up workforce, according to an October report from the parliamentary budget officer.

I believe, as does Matthew Green, that there are free passes for the rich, and severe penalties for the rest of us:

“The CRA is not pursuing Canada’s largest and most egregious tax cheats. And yet for a small mom-and-pop shop, if you don’t pay your taxes long enough — two or three years — then they will absolutely go in and garnish your wages … because they know you don’t have the ability to take it to court,“ he said.

To be fair, there is some validity in the claim that the wealthy have all manner of resources to try to thwart the CRA. Says National Revenue Minister Diane Lebouthillier,

“The super-wealthy are able to pay for super lawyers, super tax specialists. They can do everything to get out of paying their fair share.”

Increasingly, those individuals are going to court when audited in order to withhold documents, with about 3,000 “complex” cases now ongoing, the minister said.

However, the fact that other jurisdictions have been quite successful in their pursuits of the rich suggests that  Lebouthillier's explanation holds only limited water.

And it appears that Canada prefers a less costly, gentler, more accommodating strategy: 

Settlements are much more common than criminal prosecutions, saving investigators time and money, said Kevin Comeau, author of a 2019 C.D. Howe report on money laundering.

“The problem with that is that you don’t have on the public record that these persons did not comply with the tax law. And therefore you don’t have that public shaming and you don’t have that warning to other tax cheats out there,” he said.

But the problem will not go away, and needs to be addressed as quickly and as tenaciously as possible:

… critics say the vast troves of wealth that remain untouchable to government authorities reveal the need to tighten tax rules as well as hunt down cheats.

“In former times we didn’t see tax avoidance as a crime,“ said Brigitte Unger, professor of economics at Utrecht University whose book, ”Combating Fiscal Fraud and Empowering Regulators,“ was published in March.

“But now we see the public sector needs money, and this is effectively stealing money from public coffers, and should be treated as such.” 

As I said at the start of this post, I, for one, will not be holding my breath awaiting remediation from a government that is far, far too cozy with the moneyed class. 

Remembrances Of Things Past (And Present)

I suspect it is only the very young and the profoundly naive who believe that justice is blind, that all are treated equaly under the law. While a pleasing fiction that governments like to perpetuate, nothing could be further from the truth.

Consider the latest revelations about the Canadian Revenue Agency's shoddy hypocrisy, begun under the Harper regime but showing no signs of abatement under the Trudeau government.

The Canada Revenue Agency offered amnesty to multi-millionaire clients caught using what's been called an offshore tax "sham" on the Isle of Man — a reprieve that was supposed to remain secret and out of the public eye until it was uncovered by a CBC News/Radio-Canada investigation.

Canada Revenue officials demanded, and offered, secrecy in a no-penalty, no-prosecution deal to high net worth clients of accounting giant KPMG involved in a dodgy offshore tax scheme.

The amnesty allows for "high net worth" clients of the accounting giant KPMG to be free from any future civil or criminal prosecution — as well as any penalties or fines — for their involvement in the controversial scheme.

The clients simply had to agree to pay their back taxes and modest interest on these offshore investments, which they had failed to report on their income tax returns.

While this might come as no surprise to many, what compounds this egregious injustice is the fact that the CRA is far less forgiving of ordinary people, many of whom, through no fault of their own, found themselves the victims of very punitive CRA action:

Toronto tax lawyer Duane Milot, who represents middle-income Canadians in disputes with the CRA, says his clients are routinely dragged through the courts for years by Canada Revenue.

"It's outrageous," he told CBC News after reading the leaked document. "The CRA appears to be saying to Canadians, 'If you're rich and wealthy, you get a second chance, but if you're not, you're stuck.'"

Just how much contempt the CRA feels for non-wealthy people is evident in the first four minutes of the following report:



Will relief for such iniquitous inequity be forthcoming from our 'new' government? In his finely-honed prosecutorial style, Thomas Mulcair asked some hard questions of the Prime Minister in the House. I was less than reassured by the answers he was given:


I couldn't help but note that in the response he gave, Mr. Trudeau sounded alarmingly like his predecessor, deflecting the questions by criticizing the questioner and then launching into some pious platitudes.

It seems that in some ways, our new government is getting old very quickly. Consequently, the CRA's foul practices continue apace.