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.Class warfare, anyone? Or how about a little misdirection to distract people from the real villains of the piece, the corporations?
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.
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.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.”
"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."
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.You can read the details at the above link, but Cockfield draws a damning conclusion:
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).”
“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.”Do not forget that we are talking about some very, very significant lost tax revenue that the individual has to make up:
“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,”
In 2016, Ottawa collected $3.50 in income tax from individuals for every $1 it collected from businesses.The message about tax cheating is filtering down to the average citizen as well, with
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.
more than 27,000 Canadians [having signed] a petition calling on the government to raise corporate taxes and close tax loopholes.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.
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.