Putting Things Into Perspective

Few people do it as well as Robert Reich. And there are lessons here for Canada as well:

I don't know who needs to hear this, but refusing to disclose the corporations receiving $500,000,000,000 in taxpayer-funded bailouts is the real looting in America. pic.twitter.com/jg5kkDSGUh

— Robert Reich (@RBReich) June 12, 2020

Seeking Some Substance - Part 2

In Part 1, I tried to establish that there is a gross discrepancy between the rhetoric and the reality of Justin Trudeau's promise to makie sure corporations pay their fair share. Indeed, if truth be told, his government has done little or nothing to alter the CRA ethos, imposed during the Harper era, to give the corporate world an easy taxation ride. For example, as outlined in the previous post, where other countries are recovering significant sums previously lost to offshore tax evasion and avoidance, Canada has thus far recovered nothing.

The CRA, it appears, would rather indulge in some domestic spying than go after the real evaders:

The Canada Revenue Agency's Postal Code Project is targeting the wealthiest neighbourhoods in all regions of the country, those with gold-plated postal codes, where auditors will pore through the tax filings of every well-heeled resident, address by address.

They're looking for undeclared wealth, signs that a taxpayer is actually richer than their income tax filings suggest.

"Comparing someone's lifestyle — cars, boats, houses — to their reported income helps us identify people who are non-compliant," said CRA spokesperson Zoltan Csepregi.

Class warfare, anyone? Or how about a little misdirection to distract people from the real villains of the piece, the corporations?

In fact, the CRA is really not making any effort to conceal their true motives:

"The Postal Code Project also has the potential to demonstrate to the public that the CRA is actively working towards its fairness objective, which speaks to our integrity as an organization."

While not opposed to this measure, Diana Gibson of the Ottawa-based Canadians for Tax Fairness

said it deals with only a small part of the problem.

"It's a good step. It's a small step," arguing that Canada's big corporations are responsible for about two-thirds of the country's tax avoidance problems.

"We applaud it, even if it's small," she said. "It's nowhere near adequate."

While this government-approved misdirection is taking place,(and one would be exceedingly naive to believe the CRA acts independent of government direction) a new report by The Tax Justice Network shows that Canada is, effectively, one of the world’s more attractive “onshore tax havens.”

Every two years, the Network releases its Financial Secrecy Index, which shows how much

a country’s legal system facilitates global financial crimes such as money laundering and tax evasion.

Canada is No. 21 on the list, slightly higher than its 2016 ranking at No. 23. The higher the ranking, the more financially secret a country is.

“It’s a bad exam grade on the state of the country’s financial secrecy laws,” said Arthur Cockfield, a tax law scholar and policy consultant at Queen’s University. “It means that if you’re a crook or a super rich person who wants privacy, then you can use our corporate laws to hide the identity of the ultimate owner of the shares (of your company).”

You can read the details at the above link, but Cockfield draws a damning conclusion:

“The hypocrisy is that Canada is part of the OECD, forcing countries like the Bahamas, like Panama, to change,” Cockfield said. “We use our power to make them change their laws, but that just makes Canada (a) more attractive place for these crooks. We won’t change our laws.”

So, to repeat the question posed in Part 1 of this post, "What is to be done?"

There are some obvious answers, like closing the loopholes that allow this corporate cheating to take place. That is exactly what a strange alliance between the NDP and the Conservatives (politics does indeed make for strange bedfellows) is calling for:

“The system is designed for multinationals and big companies to avoid tax,” said NDP tax critic Pierre-Luc Dusseault in an interview. “The system is the problem.”

And that worm, Conservative finance critic Pierre Poilievre, chimed in:

“Those who have the financial means to set up complex arrangements are always better off under regimes that are highly complex.”

“The smaller, leaner entrepreneurial businesses can’t afford to have large legal and tax accounting departments that allow them to game the system. So they are automatically at an unfair and unjustified disadvantage,”

Do not forget that we are talking about some very, very significant lost tax revenue that the individual has to make up:

In 2016, Ottawa collected $3.50 in income tax from individuals for every $1 it collected from businesses.

The Star/Corporate Knights investigation revealed that Canada’s 102 largest corporations collectively avoided $62.9 billion in income taxes over the past six years. On average, that’s $10.5 billion less per year than if they paid the official corporate tax rate.

It’s also an average of $100 million missing from the public purse per company, per year.

The message about tax cheating is filtering down to the average citizen as well, with

more than 27,000 Canadians [having signed] a petition calling on the government to raise corporate taxes and close tax loopholes.

The petition also asks the government to consider imposing a special levy on banks, which are the country’s biggest tax avoiders.

While the Big Five banks are collecting record profits, their income tax rates have dropped to the point where companies in the banking sector paid 1/3 the rate of other large Canadian companies in 2015.

At 16 per cent, the tax rate paid by the biggest Canadian banks is the lowest in the G7.

Canada is hardly a passive victim of tax avoidance and evasion. It is clearly a facilitator. If Justin Trudeau's speech in Davos about the need for corporations to pay their fair share is to be seen as anything more than his usual pious pontifications, it is long past due that he finally prove that he is no longer interested in giving these entities the free ride they have thus far enjoyed.

Seeking Some Substance - Part 1

In yesterday's Star, Christopher Hume had occasion to call Prime Minister Trudeau the princeling practitioner of the politics of appearance. In light of an alarming shortfall in revenues that is crippling our services thanks to the government's anemic corporate tax policies, that struck me as a particularly apt description.

Indeed, that element of his persona was very much on display for the world to see last week at Davos, where Mr. Trudeau had some stirring words :

"Too many corporations have put the pursuit of profit before the well-being of their workers … but that approach won't cut it any more," Mr. Trudeau told the elite gathering at the chic ski resort of Davos. "We are in a new age of doing business – you need to give back."

Apparently, however, that sternness of tone seemed more designed for public consumption than real-world application. If that is not the case, one has to wonder why Canada appears to be very soft in the corporate taxation department:

In a joint investigation with Corporate Knights magazine, the Star last month revealed the government has never collected a lower proportion of its taxes from corporations than it does now.

In 2016, Ottawa collected $3.50 in income tax from individuals for every $1 it collected from businesses.

The foregone tax revenue is significant:

The Star/Corporate Knights investigation revealed that Canada’s 102 largest corporations collectively avoided $62.9 billion in income taxes over the past six years. On average, that’s $10.5 billion less per year than if they paid the official corporate tax rate.

It’s also an average of $100 million missing from the public purse per company, per year.

So what is to be done about it?

Well, first off, they can start by emulating other countries that have thus far recovered $500 million in unpaid taxes thanks to revelations from the Panama Papers.

The Panama Papers have proved a treasure trove for some countries, with Spain recovering the most unpaid tax so far. Its national revenue agency announced in November a $156-million windfall from taxpayers with hidden funds. Most of that — $128.4 million — came from voluntary disclosures, where the taxpayers came forward themselves following the leak to declare previously unreported income.

The Australian Tax Office said last month it has collected $49 million thus far as a result of the Panama Papers revelations. Australian tax officials snapped to action following the leak, executing 18 search warrants in just a one-week span in September 2016, at one point seizing 170 kilograms of silver bullion and coins.

Even Ecuador, which historically has had problems collecting tax from its citizens, says it has recouped $82.6 million.

Perhaps, not surprisingly, Canada has recovered nothing:

The Canada Revenue Agency maintains it will be at least another 2½ years before it will have an idea of how much it might recoup.

The stark contrast is fuelling criticism of the CRA's effectiveness at catching offshore tax cheats, and comes in the wake of a CBC investigation last month that found few, if any, of the criminal convictions the agency cites in defence of its record actually have anything to do with offshore tax evasion.

In fact, that investigation revealed that small businesses are the most likely targets of CRA wrath:

... Canadians convicted of tax evasion over the past two years are far more likely to be tax protesters or small business people who failed to declare all of their income.

And to make their statistics look better than they are, the CRA

counted each article of the law as a separate conviction.

For example, in the case of New Brunswick-based George's Heating and Plumbing, the agency counted two charges against the business as separate convictions, in addition to the convictions of five employees for having treated personal expenses as business expenses. While they were all part of the same case with the same court file number, on the CRA's list they counted as seven of the 78 convictions.

There is every reason to believe that the hands-off approach to corporate malfeasance, perfected during the Harper years and instilled as an operating ethos in the CRA, is alive and well; the current government apparently has no intention of changing that.

More evidence of this mindset, as well as the ongoing offshore tax evasion being widely practised by Canadian corporations, and what can be done about it, will be addressed in Part 2 of this post.

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

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.

Harper Lies: The Dismal Truth About Corporate Tax Evasion

My friend Gary recently alerted me to this, which should sicken all Canadian citizens. It is a story of corporate greed, massive amounts of lost tax revenues, and a government that aids and abets both. After viewing it, be sure to read the missive from Star letter-writer Robert Bahlieda that follows, and think about it when you hear the empty rhetoric from the Harper cabal about its 'tough on crime' agenda:



Recently, a Global TV investigative report on offshore tax havens indicated that as much as $20 billion of uncollected taxes are owed by major Canadian corporations and other wealthy individuals who employ these tax loopholes to evade/avoid taxes in Canada.

To add insult to injury these same individuals are given generous tax credits for moving their businesses offshore, leading many corporations like Gildan and the Toronto-Dominion Bank to pay little or no taxes year after year while making millions and billions in profits. This is not new — it has been going on for decades and there are thousands of companies doing this.

In effect, the Canadian government is subsidizing Canadian companies for moving jobs offshore to other countries, killing jobs in Canada and raising everyone else’s taxes in the process while implementing austerity measures here to supposedly stimulate the economy.

The final insult is all this is legal. While federal Finance Minister Jim Flaherty talks a good game on tax cheats, it appears he has intentional blindness about these egregious abuses of his own tax policy and no interest in pursuing his corporate friends.

Even more disturbing is the complete lack of interest and deafening silence on this important issue by government, business, academia or the public and particularly the media as indicated by the recent headlines. The antics of Rob Ford, senators like Mike Duffy who have evaded a few thousand dollars or selected abuses by a few nursing homes are deemed to be a more salacious and newsworthy headline than $20 billion in missing tax money owed by the corporate elite of Canada.

The self-righteous opposition parties are also silent on this issue. Better not to bite the hand that feeds them. Academics and economists who regularly opine on the abuses of unions have nothing to say about this unrealized multi-billion dollar tax windfall.

The massive amount of money owed by these upstanding Canadian tax cheats is a serious issue and should be top of the agendas of all in Canadian society. It is unfair, unjust and illegal despite what the tax law says. These “loopholes” (a polite term for legal corporate tax fraud) are quietly put in place and ignored by governments of all stripes to maintain their cozy relationships with powerful big business interests who have them in their hip pockets.

This is how capitalist democracy works. Powerful special interests lobby the government to get special treatment that ensures they remain powerful special interests. Meanwhile we prevaricate about increasing the Canada pension by a niggling amount or introducing a Guaranteed Income Supplement that would massively reduce social support costs in the long run, saving taxpayers additional billions.

Capitalist economics isn’t about making democracy work better, its about making it work better for the select few. Let’s start getting angry and take action on things that really matter in this world and relegate Rob Ford and the Senate scandal to the comics section.

Robert Bahlieda, Newmarket