We are in the fiscal poorhouse.
Health Minister John Haggie recently compared Newfoundland and Labrador to Puerto Rico and Venezuela, “where they turn the lights off for eight hours a day to try to make the books balance.
“That’s how bad things are financially,” he said.
At least we are not alone in our misery. Country after country, governments are facing a similar challenge — how to pay for the programs their citizens rely on. From Greece to Brazil, France, Spain and the UK, governments are dealing with major revenue and tax shortfalls.
At the same time as most income earners dutifully pay their taxes, however, wealthy people worldwide continue to hide money in offshore accounts to avoid paying their fair share. So whenever I hear we are in a fiscal mess, I want to know when action will be taken to go after the tax dodgers.
Taxes are the price we pay for living in a civilized country. They deliver public health care, a quality education system, safe water, paved roads, policing, and clean communities where our children can play and grow. Taxes also pay for the infrastructure, services, and educated workforce that businesses rely on to profit and grow.
Most income earners assume everyone is paying their fair share of taxes. Of course we now know the reality is somewhat different. Tax avoidance is a huge global scam. The recent release of the Panama Papers exposed how the super-rich are finding more and more ways to avoid paying their taxes. As the CBC reported, in this one information leak there were 11.5 million confidential documents and more than 200,000 secret offshore companies.
The amount of money that is hidden is staggering. “An astonishing amount of global private financial wealth—$21 to $32 trillion as of 2010—has been invested virtually tax free through the world’s black hole of secret tax havens,” Newsweek recently reported.
In her powerful song The Big Ones Get Away, Buffy Sainte-Marie sang, “Money junkies hire all the smart ones. Power junkies run the game.” While we habitually pay our taxes, the super wealthy are hiring law and accounting firms to hide their money, and our politicians are letting them get away with it.
Tax havens and Canada
Offshore banking is costing Canada and the provinces billions in lost tax revenues. A Toronto Star expose on tax havens reported in April that at the present time “Canadians have declared $199 billion in offshore tax haven investments around the world, according to Statistics Canada. But experts say that figure is a small fraction of the Canadian offshore wealth that goes undeclared.
“The precise annual cost to Canadian tax coffers is unknowable. But credible estimates peg Canada’s tax losses to offshore havens at between $6 billion and $7.8 billion each year.”
According to Canadians for Tax Fairness, since 1990 over $270 billion of Canadian corporate money has been invested in tax havens — $40 billion last year alone. Expect these figures to rise. Art Cockfield, a tax law expert and professor at Queen’s University recently informed the CBC that “usage of tax havens have gone up significantly in the last five years.”
According to the same CBC article, one beneficiary of tax havens is Canadian clothing maker Gildan, the Montreal-based company that earned $396 million in profit last year but paid just over $6 million in taxes. Drug maker Valeant, based in Laval, Que., recorded over $1 billion in profit in 2014 but paid only $110 million in tax.
Cameco, a major global uranium corporation with headquarters in Saskatchewan, has been transferring billions in profits to offshore tax shelters in order to dodge paying taxes on profits made in Canada. It is estimated that Cameco owes $2.1 billion in taxes.
On June 15, Canadian for Tax Fairness activists delivered a petition with 36,600 signatures to both PM Trudeau and Premier Brad Wall demanding Cameco pay up. As petitioner Don Kossick reminds us, “$2.1 billion is a lot of money.
“To put it in perspective, providing clean drinking water to every Canadian community — including the remote First Nations communities right next door to Cameco’s mines — would cost $470 million. $2.1 billion is enough to start a national pharmacare plan and could give every university student in Canada a break on their tuition.”
Visit the Canada Revenue Agency (CRA) website and you will find dozens of people from all walks of life who are named and shamed for not paying their taxes. What you won’t find are the names of anyone convicted of offshore tax evasion.
As P.E.I. Senator Percy Downe recently explained, the CRA “does an outstanding job on domestic tax evasion. If you owe money to the Revenue Agency and you live in Canada and you bank in Canada, your chances of getting caught are extremely high. There are criminal charges, prosecutions and jail sentences. But there hasn’t been one overseas tax evasion conviction.”
Tax evasion should be treated as a major crime with serious penalties and punishment, including jail time.
Consider Canadian billionaire Victor Dahdaleh, who was involved in a $400 million global bribery scheme that involved offshore companies based in the British Virgin Islands. Mr. Dahdelah was recently awarded an honorary degree from York University after donating $20 million to the institution. In his acceptance speech Dahdaleh brazenly encouraged the students to “be a good citizen.”
Giant accounting firm KPMG was recently caught in a tax “sham” enabling some 25 multi-millionaire Canadians to take advantage of a tax dodge scheme. Yet instead of getting tough the CRA made an offer of a secret amnesty whereby KPMG clients would pay the taxes they owed plus some modest interest, yet would face no penalties.
Enough is enough. Tax dodgers, be they wealthy individuals or powerful corporations, are stealing from the public purse. The CRA has to name and shame these tax cheats. Tax evasion should be treated as a major crime with serious penalties and punishment, including jail time.
Until modern democracies address tax avoidance, shut down tax havens and demand the rich pay their fair share of taxes, the dire warnings emanating from the likes of Minister Haggie and others will get louder and austerity measures will prevail.
When it comes to taxes, we need to stop the big ones from getting away.
Bill Hynd worked for Oxfam Canada as an educator and campaigner for 30 years. He is currently the co-chair of the NL Social Justice Cooperative.