offshore tax havens
All but four of the largest TSX-listed companies are "doing business" in known tax havens.
It is outrageous enough that wealthy clients got off with a slight reprimand. KPMG has, so far, paid no price for their role. The committee let Canadians down by not recommending a full investigation into this case and laying charges against KPMG if the evidence warrants it. And Canadians are right to keep demanding one.
There's been a lot of outrage over a new report that shows that Canada's wealthiest CEOs are paid 193 times more than the average Canadian. But there's an even darker side to the story. Ordinary taxpayers are subsidizing those multimillion-dollar salaries, courtesy of loopholes in our tax system.
In regards to tax evasion and aggressive tax avoidance, the Canada Revenue Agency (CRA) should be part of the solution. At the moment, it rather seems to be part of the problem. Over the last few years, we have seen that the CRA institutionalized various practices, eroding the trust that Canadians place in it.
The issue of tax havens is inherently international in scope. As a result, the government can use tax agreements to fight tax avoidance schemes. Unfortunately, tax agreements haven't been used for that purpose. On the contrary, they have facilitated the outflow of Canadian money to offshore financial centres, and have done very little to break the damaging secrecy laws of these countries.
Liberal and Conservative members of the Finance Committee seem to have little appetite to pursue the matter any further and the committee will release its report this fall, and will move on to something else. As long as politicians will be timid and fearful of using their power, Canadians have little hope of seeing the issue of tax evasion or aggressive tax avoidance being addressed seriously by their politicians.
It is hard to know exactly how much money is hidden in tax havens or passed through elaborate BEPS schemes, but some estimates range from $21 trillion to $32 trillion U.S. Rather than throwing in the towel, governments could make an earnest effort to tighten their domestic regulations and continue to pursue multilateral initiatives aimed at combating tax evasion.
Is it collusion, corruption or just plain incompetence? That answer will likely play out over time if there is a public demand for accountability. In the meantime, Canadians need a plan to make sure that our leaders understand what we have known for a while -- the tax system is neither fair nor doing an adequate job.
The Liberals' primary planned revenue generator is the increased tax rate for Canadians in the upper income tax bracket but it's coupled with a one-and-a-half percent cut for middle income earners. They originally claimed that these measures taken together would add $3 billion to the federal coffers. However, they're already backing away from that rosy prediction.