Tax Havens Mean Richest Canadians Pay Less, and it’s Unfair

Most Canadians would have finished filing their taxes for 2022 a few weeks ago. While nobody enjoys filing their taxes, most of us understand that taxation is a fairly normal part of civilized society. We understand that money gained through taxation pay for our health care system, for our military, and for a wealth of other essential services. While the majority of us do our part, we know that a large number of the richest Canadians and corporations don’t.

Thanks to leaked tax haven records in recent years such as the Panama Papers, Paradise Papers, and Pandora Papers, we know that there are thousands of ultra-rich companies and individuals who hide their wealth in offshore accounts to avoid paying taxes. It’s difficult to get an accurate number of how much the federal government is losing to offshore tax havens every year, but the CRA, in 2019, believed that the amount of revenue lost due to illegal tax evasion was between $21.8 and $26 Billion, while the Parliamentary Budget Officer stated that same year that legal tax dodges cost Canadians roughly $25 billion. A more recent report from Non-profit organization Canadians for Tax Fairness shows that 123 of Canada’s largest corporations avoided paying $31 billion in owed taxes in 2021, all while raking in record profits.

These are frankly enormous amounts of money that are going unpaid, not by your average worker who may have accidentally underreported some earnings, but by massive corporate entities and those richest of Canadians who have the capacity (and the capital) to hide those earnings in offshore accounts. These are taxes owed that could fund major programs that the majority of Canadians could benefit from, such as universal pharmacare. According to the CRA, there were 900 Canadians referenced in the Panama Papers, approximately 3,300 Canadian companies, trusts, foundations and individuals referenced in the Paradise Papers, and over 500 Canadians referenced in the Pandora Papers.

With the leaks contained in these papers, clearly there should be enough details for the CRA to be able to go after those who have illegally hid money in offshore accounts. However, a recent response to an Order Paper question initiated by NDP Tax Fairness Critic MP Niki Ashton to clarify exactly how many audits of Canadian individuals and companies featured in the leaks have been conducted, as well as how many criminal investigations are ongoing or have been completed, is quite telling.

In response to the questions posed, the Minister of National Revenue’s office notes that there have been a total of seven referrals to the CRA’s Criminal Investigations Programs (CIP) in response to the Panama Papers. Of those, five had proceeded to criminal investigations, where three have been discontinued, and two remain ongoing. In reference to the Paradise and Pandora Papers, there have been no referrals to the CRA’s CIP, so not only have there been no prosecutions, but there have also been no investigations.

The government isn’t doing enough to crack down on tax evasion and tax havens, even when the details of those who actively try to hide money to avoid paying taxes comes to light. It’s clear that the loopholes that allow billionaires and corporations to avoid paying their fair share are too large and need to be closed. There are models used elsewhere in the world that we can use to force corporate entities from using tax havens. Australia has now made it law that multinational corporations must report how much tax they have paid in each country in which they operate, which is designed to bring an end to corporate profit sharing, a practice that allows companies to shift their profits to tax haven countries to claim lower tax rates, even when they don’t operate in those countries. We can also empower CRA by boosting compliance funding to CRA’s enforcement section dealing with international and corporate taxation. The Parliamentary Budget Officer examined how much additional revenue could be brought in with an additional investment in CRA audit enforcement. They projected Canada would have generated $492 million in new revenue in 2022-2023 if the federal government increased investment in CRA audit enforcement by $100 million, five times the invested dollars.

Most Canadians play by the rules. It’s time that large corporations and the billionaire class play by the same rules.