Tax havens: the last chance budget
Tax havens: the last chance budget
At the end of January, with the federal budget fast approaching, the Collectif Échec aux paradis fiscaux addressed this letter to federal Liberal MPs in the hope of obtaining measures in the budget that would reflect a genuine will to eliminate tax havens.
The 2019 budget will be the last one handed down in your term of office. The past 10 years have been marked by scandals in the media exposing the magnitude of the tax haven problem and the ease with which multinational companies and the very wealthy avoid paying their taxes: the KPMG affair, the Panama Papers, the Paradise Papers, the Offshore Leaks, the Lux (Luxembourg) Leaks and the Swiss Leaks.
As Québec economists pointed out in a recent survey, eliminating tax havens should be a priority in the next budget. Yet in spite of your claims to defend the interests of the middle class, few tangible steps have been taken to advance a genuine strategy of eradicating tax havens.
Canada is lagging behind on tax fairness, despite the limited measures it has enacted over the years, such as investing in more auditors for the Canada Revenue Agency (CRA) and in the Tax Court of Canada, eliminating certain tax provisions and participating in international efforts to get more countries on-side.
To cite one example, your government continues to legalize the use of tax havens by signing new tax treaties with those very countries, as it did in 2018 with Antigua and Barbuda and Grenada. Under these agreements, companies are free to transfer back their profits in the form of dividends that are exempt from taxation in Canada. This is a flagrant violation of the motion passed by the House of Commons in May 2017 condemning tax avoidance practices and the complacency of such tax treaties.
Your government has full powers to tackle the root of this problem. What are you waiting for? CRA auditors themselves have admitted that the Canadian tax system favours big money and companies. When will the CRA be given a significant boost in resources to do its job?
What is Canada waiting for when it comes to criminalizing tax avoidance practices and reviewing its tax laws?
What is preventing Canada from taxing the profits that multinationals are diverting to tax havens and from adequately taxing the digital economy?
Why not dare to tax companies’ economic activities in the country where the activities are actually conducted, rather than allowing these companies to report their income in tax havens?
You can’t dupe the Canadian public. It’s easy to see that being rich in Canada means being able to legally get out of paying taxes by using tax havens. So far, the CRA has filed zero charges in the wake of the Panama Papers, while other countries have already recovered nearly $500 million. As for the whole sorry matter of the KPMG scandal, we continue to be appalled that not a single criminal investigation has been launched.
Unfortunately, your government has been content to do only the bare minimum these past few years. You even refuse to utter the words “tax haven” in public—a fairly telling indication of denial!
It is imperative for Canada to become a leader in the fight to eliminate tax havens. There is no shortage of promising international initiatives to inspire you. The United Kingdom took a pioneering step in 2016 by introducing a tax on profits diverted to tax havens (also known as the Google tax) and creating a public register of companies’ ultimate beneficiaries, as a measure to increase corporate transparency. Australia and the European Union have also adopted useful measures inspired by the United Kingdom. Even Québec has undertaken to fight international tax avoidance practices.
Your upcoming budget is the opportune moment to announce a clear shift in your government’s strategy for fighting tax havens, if sincerely committed to defending the middle class and tax fairness. To this end, Canada needs all its taxpayers to fully meet their tax obligations. Our society has to care for, educate and properly serve its population, provide a fair taxation framework for companies and individual taxpayers, and make the economic, ecological and energy transition that’s necessary to meet the challenges of our time.
This letter appeared in Le Droit on January 31, 2019.