Next week's G8 Summit is an unprecedented opportunity to tackle the murky world of tax havens. But Canada threatens to be a spoiler. Again.
British Prime Minister David Cameron has proposed an action plan to his G8 counterparts. His proposal begins to impose some rigour on the shell game and paper trails that are draining revenues from most every government treasury in the world.
When he arrived in London this week, Prime Minister Harper confirmed his commitment to Cameron's proposal for country by country reporting -- a system to track if and where multinational corporations pay taxes on profits. That is a good start.
But for a plan to work it has to be comprehensive. Officially, there have been some mumbled responses about Canada's position on the other sections of the plan. But dig a little deeper and it looks like Stephen Harper could block agreement.
British insiders are concerned and frustrated that Canada is withholding support for two key points:
• Requirement for all governments to create a public registry of the ultimate beneficial owner of all bank accounts, trusts or corporations, and
• Multilateral automatic tax information sharing between governments.
These two measures are key to lifting the veil of secrecy that allows wealthy individuals and corporate tax evaders and criminal organizations to hide their wealth off shore. And they have a growing measure of support from tax lawyers and managers who recognize that the offshore industry has morphed into an ever-growing, unregulated mess drains economies world-wide.
And that's the disturbing thing.
Fiscal management requires a constant eye on what's happening in the real world. Canada hasn't changed its position on tax havens since the Royal Bank landed on Bermuda shores more than 50 years ago.
In Canada's case, tens of billions of dollars of additional revenue are sitting offshore. That money could be available if tax havens were forced to play by some new rules about transparency and reporting. Not by raising taxes - just by collecting what is legitimately owed.
So why the foot-dragging.?
One reason may be that Canada falls short of the proposed international standard on beneficial ownership. It is possible to register shell corporations in some jurisdictions in Canada without providing proper documentation on the ultimate owner. Federal finance types shrug their shoulders and say it is a provincial matter.
Under the G8 plan some provinces would have to modernize their corporate registration rules and bring them up to international standards. But calculations by Canadians for Tax Fairness show that every year, provincial lose billions in tax revenues under the current system. Provinces would have a better chance of protecting health, education and public services - all without raising taxes. How is that a bad thing?
Canadians are committed to investing in their community and their country by paying their taxes. But there is an unease about the ability or political will to protect our hard-earned money and use it wisely.
That's why the tax haven issue is showing up on the political radar.
A public opinion poll by Strategic Communications, commissioned by Avaaz found that 85% of Canadians support Canada joining international efforts to address tax evasion and aggressive tax avoidance at the G8.
This poll also found that 81% of Canadians think PM Harper should agree with the G8 proposal requiring countries to list the true owners and beneficiaries of corporations.
This week, I watched as Avaaz delivered a letter to the Prime Minister office. It was signed by 50,000 Canadians, including over 900 business owners. They called on Mr. Harper to support Prime Minister Cameron's action plan on tax havens. That same letter was signed by more than 760,000 people worldwide. The rest of the world is watching us.
The G8 action plan is important for Canada, but it also has global implications that are critical.
Poor countries lose ten times as much as they receive in aid because of illicit financial flows facilitated by tax havens. With aid flows falling, including from Canada, poor countries are under increased pressure to raise more resources domestically. But their efforts are undermined by tax havens which facilitate corruption and corporate tax evasion. International development organizations like Oxfam and the Halifax Initiative have pushed hard for a plan that would address this. But observers worry that the automatic tax information exchange could be limited to between developed countries.
The tax haven world is small. But the trillion dollar stakes are staggering high for those who benefit. You'd better believe that they will push back. The G8 is a chance for our political leaders to show they won't be outsmarted or seduced by outdated economics.
Let's hope pressure from other G8 leaders and the public will move Harper to do the right thing.Suggest a correction