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.

 

 

Careful What You Wish For

With so many cities, including Toronto, vying to become Amazon's second headquarters, they might be mindful of some basic truths about Jeff Bezos and his business practices:

Amazon founder Jeff Bezos' wealth increases by $275 million every single day. Meanwhile, Amazon workers have to rely on food stamps and public assistance just to survive. This is what a rigged economy is all about. pic.twitter.com/Ty7ECxvOkl

— Bernie Sanders (@SenSanders) May 22, 2018

Now what was that thing Jesus said about rich men, camels and eyes of needles?

Have You Signed Yet?

Despite all of his sanctimonious talk about tax fairness, there is little evidence thus far that Justin Trudeau is committed to anything more than indulging in his standard soaring rhetoric. Now, there is a a petition being circulated on Change.org. that seeks to change that.

As reported in today's Star, the petition

was launched by advocacy group Democracy Watch after the Star, in partnership with Corporate Knights magazine, published an investigation last month that showed how individuals pay three-and-a-half times more income tax than corporations.

An excerpt from the petition offers these disquieting statistics:

Canada's official corporate tax rate is now 26.6% but, on average, Canadian big businesses paid only 17.7% from 2011-2016 -- one of the lowest rates of all G7 countries.

Canada's Big Banks paid a tax rate of only 16% over the past 6 years -- lower than banks in other G7 countries. They are the biggest tax evaders of all Canadian big businesses and, not surprisingly, also the most profitable. They made a record $42.3 billion in profits in 2017.

And that lost tax money could have been used to accomplish so much good:

If Canada's big businesses and banks paid the official tax rate from 2011-2016, governments across Canada would have almost $64 billion more to spend on making hospitals, schools, housing, public transit and roads better, and on other things Canadians need.

Given the sociopathic nature of corporations, they will never pay any more than they have too. Their much vaunted 'fudiciary responsibility to shareholders' is the tenet by which they justify their efforts at tax avoidance and cheating others out of their rightful due.

Consider, for example, Sears Canada. Francine Kopun writes:

Handsome dividends paid to Sears Canada shareholders even as the company was faltering and its employee pension fund was running a deficit are being reviewed by the court-appointed monitor handling the company’s insolvency.

The transactions of interest, according to the monitor, include a dividend of $102 million paid to Sears Canada shareholders on Dec. 21, 2012, and $509 million paid on Dec. 6, 2013.

The problem is, Sears was already seriously bleeding cash when the dividend was issued, and guess who paid the price? The Sears pension plan.

The pension deficit was $307 million in 2010 and $133 million in 2013.

When the company sought creditor protection in June, the pension fund had a deficit of $270 million, potentially leaving retirees with reduced incomes.

“Certainly from our standpoint, we felt that the payments of dividends, when the company was not making money and there was no investment in the company and there was a debt to the pension plan, were inappropriate,” said Ken Eady, a spokesperson for Sears Canada retirees.

Companies will never act with integrity on their own. That is why the role of government is essential in moderating their greed.

Please give serious consideration to signing the petition at Change.org.

Tax Fairness: A Doubtful Prospect

Recently I wrote a post expressing doubt that the tax treaties signed by Stephen Harper at the urging of big business will not in any way be amended by Justin Trudeau. Tax Information Exchange Agreements (TIEAs), as manipulated by Harper, allow for the legalized theft of countless billions of corporate tax dollars from the public treasury, thereby limiting what government can do to alleviate social and economic woes here at home.

Judging by some letters in today's Star, I see I am not alone in my suspicion that relief will not be forthcoming from our 'new' government:

Re: Why not outlaw use of tax havens? Letter June 22

Re: Loopholes costing Canada billions in lost revenue page, June 17

Sadly, Robert Bahlieda is a prophet crying in the wilderness. The criminalization of corporate tax avoidance is next to impossible when, as he rightly argues, it is ingrained in our culture and politicians routinely coddle business interests.

While it took great courage for Prime Minister Justin Trudeau to reject austerity and embrace infrastructure spending, it will take even more political chutzpah to entertain radical tax reform when Canadians are unwilling to pay even for the programs and services they need.

In the end it is we the citizens who must object to the privatization of our democracy. We need to care enough about it to insist that our representatives uphold the importance of taxation in a civilized society – the principled starting point of any true reform.

Salvatore (Sal) Amenta, Stouffville

This article should leave no doubt in anyone’s mind about who Western governments, and in particular the Canadian government, represent. It sure as hell isn’t the average voter in Canada.

I resent my hard earned tax dollars being spent on giveaways to multinational corporations like Bombardier, GM, and many others to ostensibly “create” new jobs, or “preserve” current employment, when these wealthy corporations pay next to no Canadian taxes. They then use their profits to buy back shares to better reward their executives, while at the same time cutting employees.

As the article points out, Canadian government policy has been to encourage the offshoring of profits.

The most effective way to stop this corporate gravy train is to eliminate income taxes on profits and replace them with a turnover tax of 1 to 3 per cent on all sales in Canada. Taxes on profits are easily subverted as we have seen with the shifting of taxes between Ireland and other jurisdictions.

A tax on corporate sales for the privilege of selling in Canada would at one fell swoop eliminate all the fancy accounting practices and legal manoeuvres to avoid taxes. Sales are the easiest thing to monitor and the most difficult to obscure.

Don Buchanan, Etobicoke

When discussing corporate tax avoidance the argument is made that Canadian multinationals need these “tools” to give them the “best ability to compete on international and global scale.” We’ve heard this kind of argument in another sphere – doping and steroid use in professional and amateur athletics.

Perhaps it’s time the multinationals were also barred from competition and stripped of their hardware so that the ethical ones can thrive.

Sid Potma, Toronto

The integrity of Canada’s tax system, as it’s currently written, looks disproportionately to its citizens for the tax base to maintain our country. I would appreciate it if some one would publish a list of the Canadian companies/corporations blatently avoiding billions in corporate taxes, thus placing an unfair burden on all of us to maintain the basic lifestyle we have become accustomed to.

Richard Kadziewicz, Scarborough

Burger King Causes Indigestion

At least among the substantial numbers of Americans who appear to be taking grave exception to the burger emporium's tax dodge by merging with Tim Hortons. While Finance Minister Joe Oliver may crow about the success of our low corporate tax rates, American consumers are not nearly as sanguine about what many see as a corporate betrayal of the United States.

A sampling of the comments on Burger King's Facebook page is instructive of prevailing sentiments:

burger king crowned king of the tax dodgers! boycott!!!!!

As a veteran I encourage you to sponsor a bill that shuts down every single Burger King located on an American military installation in the U.S. And around the world and on other Govt property. I feel only companies that are headquartered in the U.S. Deserve to be able to conduct business on govt facilities. I find it very up unpatriotic that our service members who risk there lives would have these tax dodging companies located on their bases. I am very interested in your position on this matter Senator Nelson.

Say "NO" to tax dodgers!

I will Not eat any Cookies sold by any US Tax Cheats - Burger King will not get my fast food dollars - By not paying your fair share of U.S. tax - you will cost the Middle Class more in federal taxes every year - BoyCott BK!!!!!

And this, my personal favourite:

If the King flees to Canada, let's hope he gets his just deserts. Off with his traitorous tax-dodging head! If corporations are really people, this is a good time to execute one. Boycott the tax dodgers.

A More Realistic Appraisal of Jim Flaherty

If, like me, you were rather appalled by the hypocritical yet predictable enconiums offered to Jm Flaherty by his political foes, you will likely enjoy this letter from Ottawa Star reader Morgan Duchesney, who renders a far more realistic appraisal of the departing Finance Minister:

Re: Chance for a fresh start, Editorial March 19

As Jim Flaherty retires to “private life,” I wish him a speedy recovery from his lingering illness. Missing from the goodbye accolades is any mention of Flaherty’s greatest failure. Whether sick or healthy: Flaherty lacked the will to take any serious steps to collect the billions in unpaid taxes that sit safely in foreign tax shelters.

Flaherty’s tired excuse about not wanting to punish “job creators and innovators” is a bit threadbare in light of abysmal levels of corporate investment in Canada. If Canadian corporations are operating overseas while shifting profits to low-tax jurisdictions, exactly who is benefiting and just how “Canadian” are these companies if they employ foreigners and only benefit arms-length stockholders?

I challenged Flaherty’s flimsy logic whereby pursing elite tax evaders will increase the likelihood of capital flight, higher consumer prices and corporate bankruptcies. The possibility of these eventualities raises an interesting question: what do corporations receive in exchange for their taxes?

Perhaps defenders of offshore tax shelters and corporate tax cuts forget that taxes pay for education, health care, infrastructure, public administration, law enforcement and the military. Without these programs there could be no business and large businesses benefit exponentially from tax-funded public services.

Beyond the fact that he has been busy turning Canada into a tax shelter; there is a more practical reason for Flaherty’s tax shelter reticence. I expect Flaherty, like his colleague Jim Prentiss; will resurface as a banking executive. To complete the circle; his replacement, Joe Oliver shifted from investment banking to the world of politics. Perhaps it is time for some fresh ideas at Finance?

On Corporate Propaganda and Tax Avoidance

It is the fashion among our corporate overlords and their rabid right-wing courtesans to utter a trite phrase that, because it is repeated so frequently, is taken as truth by many: We don't have a revenue problem, we have a spending problem. Like the magician who relies upon misdirection to perform the seemingly miraculous, the corporate cabal purports to prove, through both its rhetoric and 'studies' done by its think tanks (think The Fraser Institute in Canada, The Cato Institute in the U.S. as examples), that taxes are 'job killers' and that the key to robust economies and solid employment numbers is low taxation.

Of course, the falsity of such assertions has been amply demonstrated, most recently by Bank of Canada Governor Mark Carney, who has weighed in on more than one occasion about the abysmal rate of business investment in new machinery and equipment — considered vital to boosting growth, creating jobs and making the economy perform more efficiently. This sad state despite the fact that Canada has one of the lowest corporate tax regimes in the world.

While there will always be the true believers who subscribe to the myth of the efficacy of marketplace discipline and an ultra-low tax regime, I suspect more and more are starting to realize that the corporate agenda has nothing to do with the betterment of society or the support of democracy, and everything to do with its own self-aggrandizement. As reported last week in The Toronto Star, The OECD (Organization for Economic Cooperation and Development), consisting of 34 countries, issued a report condemning the practice of corporation, including giants such as Google, who are shifting profits to places where they pay little or no tax, places such as the Cayman Islands, Bermuda, and Barbados.

As the report points out, not only is this costing the countries in which these corporations do business billions of dollars in lost revenue, it is also encouraging a perception that the domestic and international rules on the taxation of cross-border profits are now broken and that taxes are only paid by the naive, and if nothing is done about the situation ordinary taxpayers might refuse to pay their share of taxes on the grounds that the system is unfair.

So there you have it: corporations with a patent disdain for the countries who make their businesses both possible and viable, without conscience or concern for the massive damage their schemes do to the social and economic fabric of those countries, beholden only to their own bottom lines and their shareholders.

If such misbehaviour is not an indictment of unfettered capitalism, then I don't know what is.