New Democrats are committed to confronting tax evasion and taking action to ensure the integrity of our tax system. We are also very concerned about the inaction on the part of the Conservatives to end tax evasion and discourage the use of tax havens.
Independent estimates suggest that Canadian tax revenue lost to offshore tax havens could amount from 5 to 7.8 billion dollars annually. The UK, the US and Australia have all produced tax gap estimates, yet the Canada Revenue Agency (CRA) has made no effort to measure the Canadian Federal Tax Gap, and Conservatives have repeatedly indicated that they have no intention of calculating a Tax Gap estimate.
In a report for the Tax Justice Network, James Henry - former chief economist of McKinsey & Co – calculated that at least $21 to $32 trillion is held in tax havens worldwide. Tax Havens were the destination of 24% of Canadian investment overseas in 2011. This is up from 10% in 1987. 24% of Canadian direct investment overseas in 2011 went to the top twelve tax havens. Canadian investments in the top 5 tax havens of Barbados, Cayman Islands, Ireland, Luxembourg and Bermuda totaled $130 billion in 2011.
New Democrats successfully pushed for House of Commons Standing Committee on Finance to study this issue so that we can find solutions to protect our tax base. Unfortunately the recommendations of the report fail to adequately confront these very serious problems and New Democrat members of the Finance Committee were compelled to submit this supplementary opinion that laid out clear recommendations: http://www.parl.gc.ca/HousePublications/Publication.aspx?DocId=6085040&Language=E&Mode=1&Parl=41&Ses=1&File=159
Another issue of concern is Conservative cuts to the CRA that will likely diminish the capacity of the agency to deal with tax evasion, tax avoidance and the use of tax havens. Instead of investing in tax revenue recovery, the Conservatives are cutting the CRA by over $250 million and cutting over 2500 FTEs over the next several years.
Leading up to the recent G-8 summit in Northern Ireland, multiple groups reported that the Canadian delegation was resisting UK-led efforts on a number of measures to combat tax evasion - specifically measures to identify the true owners of offshore accounts and shell companies by disclosing “beneficial ownership” information.
New Democrats put intense pressure on Conservatives to stop their obstructionist efforts, highlighting that Canada is one of the most lax jurisdictions in the world when it comes to setting up anonymous shell companies. After months of pushing the Conservatives we are glad to see they have been dragged to finally make some commitments on tax havens at the G8, but unfortunately, they refused to agree with the UK’s call for the creation of a public registry to identify the true owners of the companies.
Conservatives are also failing monumentally at one of the basic responsibilities of a government: tax collection. A recent Auditor General’s report identified 29 billion in uncollected tax debts and specified that the CRA has been unsatisfactory in pursuing tax of over $10 million and from corporations. The tax debt has increased by 60% since the Conservatives took power in 2006, rising from $18 billion to $29 billion dollars. This is distinct from the unknown amount of taxable income that is hidden in tax havens and is undeclared.
In an effort to deflect mounting criticism over inaction on tax evasion, Conservatives recently announced with great fanfare a “Swat Team” to pursue tax evaders. Sadly the announcement was simply a reallocation of previously announced funding for a team of only 10-12 people to pursue tax cheats. Once again the Conservatives have demonstrated their gross underestimation of the scope of this multi-billion dollar problem.
Instead of cutting the CRA’s budget, the federal government should be working to ensure that the Canada Revenue Agency has sufficient resources to effectively prevent, investigate and prosecute cases of tax evasion. The federal government needs to also create an efficient system to identify and prioritize the continuous closing of loopholes and develop tax laws to curb egregious forms of tax avoidance. Ultimately this is an issue of the government taking responsibility and providing fair taxation for all Canadians.
New Democrats believe that the government of Canada has a responsibility to protect Canada’s tax base and we will continue to push the Conservatives to finally get serious when it comes to tax evasion.
Canada must take action to put an end to tax evasion. http://petition.ndp.ca/no-to-tax-havens
*Murray Rankin is the Official Opposition Deptuty Critic for National Revenue.