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Tax Evasion Will Persist Until Parliament Hill Steps Up

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Chris Wattie / Reuters

It seems like every year a new tax haven scheme is revealed, provoking the ire of Canadians... only to fade from the news a few months later.

In 2008, tax evasion schemes involving the Swiss bank UBS and the Liechtenstein's LGT bank were revealed, and quickly relegated to the back pages. It was followed by more leaks, the last in date, involving the KPMG scheme at the Isle of Man and the Panama Papers.

Last spring, the NDP pushed through a motion to study more specifically the KPMG tax scheme involving the Isle of Man, where the tax consulting firm hatched a plan to create empty shell corporations in the British territory, implemented 15 plans involving 25 Canadians who made tax-free "donations" to the offshore companies.

The CBC/ICI Radio-Canada investigation demonstrated that these companies produced nothing and provided no services. But they gradually gifted the money back to these individuals, sums that were never declared to the Canada Revenue Agency.

Court documents suggest that KPMG was paid a commission of up to 15 per cent of the tax dodge for each of these individuals (KPMG admitted to taking a flat rate of $100,000 for each of the 15 plans).

Shockingly, when the CRA caught wind of the scheme, it offered its beneficiaries a sweetheart deal with no penalties.

The five meetings held by the Finance Committee on this topic were frustrating to the extreme. It was next to impossible to get meaningful answers from either KPMG representatives (hiding behind attorney-client privileges) or the Canada Revenue Agency (hiding behind privacy concerns), while the Canadian government seemed to do its best to claim that everything was mostly fine, the rest was being taken care of.

These testimonies did little to assuage the doubts. Take for example the question of the CRA letter of amnesty/settlement to the alleged tax evaders.

Stephanie Henderson, manager of the Canada Revenue Agency's Offshore Compliance section, signed an offer made to Canadians who benefited from KPMG's tax evasion scheme to the Isle of Man to repatriate their funds to Canada while only paying the amount owed in taxes, without any penalty.

CBC/ICI Radio-Canada obtained and released that letter.

Canadians have little hope of seeing the issue of tax evasion or aggressive tax avoidance being addressed seriously.

When Canada's National Revenue Minister, Diane LeBouthillier, appeared at the Finance Committee on May 19, alongside Ted Gallivan, Assistant Commissioner, International, Large Business and Investigating Branch, I asked them about this letter. This question led to a completely surreal exchange in which they were unable or unwilling to confirm the authenticity of the document.

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.

KPMG is before the Tax Court of Canada, pleading that this tax scheme was legitimate. The government brought the matter before the Federal Court of Canada to try to get the name of those who benefited from the scheme. Both of those cases are not expected to be ruled upon before 2017, and possibly as late as 2019.

These court cases are used as a justification for parliamentarians not to investigate this specific scheme, because it could "interfere" with ongoing legal proceedings. It certainly impeded the ability of the committee to get answers.

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.

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