Canada is doing less than many other countries in going after tax cheats, and honest taxpayers are getting stuck with the bill as wealthy Canadians get away with evasion, opposition critics are charging.
Hoang Mai, the NDP’s national revenue critic, says the government’s $250 million in budget cuts to the Canada Revenue Agency will make an already bad situation with tax evasion even worse.
The MP for Brossard-La Prairie says the government’s apparent plan to eliminate 400 auditor jobs at the CRA -- all of them reportedly in the compliance department, which deals with criminal investigations -- is a sign it’s not taking tax evasion seriously.
There is an element “of protecting your friends — millionaires with offshore bank accounts” in the government’s reluctance to pursue tax cheats, Mai told The Huffington Post Canada on Wednesday. He stressed that he considers the previous Liberal government to have been as delinquent on the issue as the current Conservative one.
Revenue Minister Gail Shea told Parliament this week the federal government is "not laying off any tax evasion experts."
“Some of these positions may move or may change to allow for better coordination between the Canada Revenue Agency, the RCMP and the Public Prosecution Service of Canada,” she said.
“Recently announced reductions at CRA reflect the fact that more people are filing their taxes electronically rather than phoning in or mailing paper.”
A recent analysis of Statistics Canada data from economist Toby Sanger found that Canadians currently have more than $53 billion stashed in Barbados, a well known tax haven, and nearly $26 billion sheltered in the Cayman Islands.
Sanger estimated that nearly a quarter of all overseas direct investment by Canadians now goes to the top 12 tax havens, up from 10 per cent in 1987.
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“A large and growing share of this money isn’t going into real capital investments that could ultimately benefit people overseas or in Canada; it’s going into tax avoidance that benefits a wealthy few at the expense of the large majority in Canada and around the world,” Sanger concluded.
Opposition critics charge that Canada has been particularly bad in pursuing large-scale tax evasion.
Liberal Senator Percy Downe has been pressuring the government to take action on a list of 106 bank accounts believed to belong to Canadians who are withholding taxes.
In 2006, the German government obtained bank records from Liechtenstein that exposed hidden bank accounts held by wealthy individuals from around the world, including 106 Canadians. The minimum balance to open one of these accounts was $500,000, and one account had at least $12 million in it, Downe told The Huffington Post Canada last month.
“People have been charged in the U.K., in Australia — but not one Canadian has been charged,” he said.
Mai said the government is likely missing out on some $15 million in revenue by not pursuing these account holders. The CRA is “going after the small fish, and not tackling the millionaires and multinationals,” he told HuffPost.
Mai said other taxpayers get stuck paying for the foregone revenue, either in the form of higher taxes or fewer government services.
A report from international tax expert James Henry, released earlier this summer, estimated that there is $21 trillion to $32 trillion in wealth being held in tax havens around the world, representing hundreds of billion of dollars in uncollected revenue.
Henry appeared this week at the Ottawa launch of a new anti-tax haven campaign from Canadians for Tax Fairness, which aims to pressure the government into taking action on tax cheats.
In Parliament this week, Mai accused the government of failing to prioritize tax evasion.
“Over the past year, we have seen a government willing to spend tremendous resources targeting single parents, charitable organizations, environmental groups, and the most vulnerable instead of going after offshore accounts belonging to billionaires and multinationals,” he said.
Shea disputed that, telling the House that “since 2006, we have audited thousands of cases and identified more than $4 billion in unpaid taxes, through our efforts on international and aggressive tax planning.”
“This is compared to only $174 million in the last year that the Liberals were in office. The number of voluntary disclosures last year alone increased by an astounding 238 per cent.”