The ground has shifted.
The Panama Papers leak has unleashed a tsunami of data and paper trails that show just how far -- geographically and morally -- the super-wealthy will go to avoid paying their share of taxes. It is a sense of entitlement that has the rest of us outraged and angry. There is an added sense of betrayal that our governments and regulatory agencies let this happen on their watch.
Is it collusion, corruption or just plain incompetence? That answer will likely play out over time if there is a public demand for accountability.
In the meantime, Canadians need a plan to make sure that our leaders understand what we have known for a while -- the tax system is neither fair nor doing an adequate job.
For most of us, tax policy is something we leave to others. As a result, it has been shaped by those with the most to gain or lose -- the rich and big corporations.
But ordinary tax payers lose out big time when governments don't raise enough revenue to fund essential public services and address all the challenges we face, such as poverty and climate change. Making it right won't be easy. But here are some important steps that we can take together.
Over 90 per cent of individuals who use offshore accounts do so in order to illegally avoid taxes.
1. Don't believe the argument that most of this is "lawful tax avoidance." A French government study found that over 90 per cent of individuals who use offshore accounts do so in order to illegally avoid taxes.
2. Reform corporate tax rules. Much of the corporate use of tax havens may be legal, but this doesn't make it right. We need to stop companies from shifting profits offshore. With the second-lowest corporate tax rate in the G7, Canadian companies don't need subsidiaries in tax havens to be competitive.
Corporations should pay taxes to each country where they operate. This can be proportional to where they have their capital investments, employ staff and generate sales. Most offshore subsidiaries have little or no staff, and are little more than a fictional place to hide profits and avoid taxes. They should not count for tax purposes unless they have economic substance.
3. Pressure government to prosecute KPMG for facilitating tax evasion for Canadian multi-millionaire clients using KPMG tax scheme on the Isle of Man. An internal memo called KPMG employees who pushed this scheme "champions." That's not what a champion looks like in our books. Send a message to the "wealth management" industry that aggressive tax planning that crosses the line will not be tolerated.
4. Demand the CRA make public all deals with individuals or companies who have been caught evading taxes. Currently, many high net-worth individuals and corporations stay out of the public eye because of secret out-of court-settlements. How many exactly? We don't know, and the CRA won't say. What kind of sweetheart deals have been made? We all have a right to know. It's not fair that rich Canadians are treated differently.
Some governments seem more intent on going after whistleblowers and journalists than tax dodgers.
5. Ask for regular reports from the CRA on how they are following through with investigations and leaked files they have obtained. Currently, the CRA has been stretching the "confidentiality" argument to limit information. And they can't or won't give Canadians a status report on the Luxembourg Leaks information from three years ago.
6. Support stronger rules to prevent the creation of anonymous shell companies and demand transparency of beneficial ownership. One under-reported aspect of the Panama Papers is that the Panamanian law firm was telling their clients Canada was a good place to register a shell company because of lax provincial rules on ownership of companies.
The federal government needs to lean on provinces who fall below the international compliance standards. Provinces have much revenue to gain from stronger action against tax evasion, so it is in their own interests to up their standards.
7. Get behind the tax gap. Canada's major trading partners use modern methodologies to calculate the difference between what tax revenue should be and what is actually collected. The Canada Revenue Agency has dug its heels in and refuses to work with the Parliamentary Budget Office to do the same. But it fails to offer any better solution and current strategies are underwhelming.
8. Without a tax gap measurement, it is difficult to identify most problematic areas, create solutions and evaluate success. The new government should do a tax gap study now to get a baseline, and then do another four or five years from now to measure the improvements they are able to make as a result of stepped-up enforcement efforts.
Globally, only a handful of people have been charged as a result of multiple leaks of thousands of documents in the past three years. Some governments seem more intent on going after whistleblowers and journalists than tax dodgers.
Antoine Deltour, the Luxleaks whistleblower, is facing trial in Luxembourg this month.
Whistleblower Edward Snowden recently told a Vancouver audience that the Panama Papers demonstrate that "change doesn't happen by itself and the participation of the public is absolutely necessary. We can achieve change... whether we do or not is a decision that falls to us."
We owe it to ourselves to make that change.
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