The House of Commons Standing Committee on Finance (FINA) report on tax avoidance and tax evasion provided mixed news for Canadians concerned about tax fairness. Many of the recommendations in the report, The Canada Revenue Agency, Tax Avoidance and Tax Evasion: Recommended Actions, have the potential to improve how the Canada Revenue Agency (CRA) responds to tax evasion. On the other hand, comments from the Minister of National Revenue and CRA officials have led to concerns that the way the government will implement the recommendations will render them meaningless.
“What’s in the report reflects the anger Canadians feel when large corporations and the wealthy avoid paying their share,” said Larry Brown, President of the National Union of Public and General Employees (NUPGE). “But the defence of the status quo by the Minister of National Revenue and CRA officials in the committee hearings makes it clear we will need to keep the spotlight on the recommendations if we don’t want them watered down to the point of uselessness.”
KPMG tax haven scheme for wealthy led to hearings
FINA decided to hold hearing on what the CRA was doing to crack down on tax avoidance and tax evasion after details of a KPMG scheme to use shell companies in a tax haven to help wealthy Canadians avoid paying their share of taxes. In some cases people with millions in assets paid no tax.
But while KPMG was being investigated for helping wealthy Canadians avoid paying their share, KPMG officials still had access to federal cabinet ministers and CRA officials. When news of a deal that would give amnesty to KPMG and its clients leaked out last March many people were left questioning the federal government’s commitment to crack down on tax havens. The FINA hearings were an attempt to respond to that concern.
Canadians for Tax Fairness made tax havens an issue
There’s nothing new about large corporations or wealthy individuals using tax havens to avoid paying their share. It’s estimated that Canada loses $8 billion a year in tax revenue due to tax havens. What is new is the scrutiny that tax havens are getting in Canada.
Much of the credit for this rests with Canadians for Tax Fairness which has pushed for rules to be tightened so wealthy individuals and corporations are no longer able to take advantage of tax havens. Many of the stronger recommendations in the report were proposed by Canadians for Tax Fairness.
Recommendations would help curb tax avoidance but challenge is getting the federal government to act
If all of the recommendations are accepted, it would show the government is serious about cracking down on tax avoidance. Among the stronger recommendations are one to require all tax lawyers and accountants to register all tax schemes with the CRA. Studying and making public statistics on convictions and penalties, to give people a sense of whether the law is being enforced, was also proposed.
While the finance committee recommendations are a step forward, comments by both the Minister of National Revenue and CRA officials during the finance committee hearings left people concerned that the recommendations would either be ignored or implemented in a way that rendered them meaningless.
Government goes easy on users of the KPMG tax haven scheme
Among the issues that emerged with the KPMG tax haven scheme was whether the CRA had the resources to deal with tax avoidance and whether the CRA was too quick to make deals with well-heeled individuals or corporations. Neither the minister or CRA officials provided much reassurance on those points. A low point came when both the minister and a senior CRA official refused to even say whether a letter offering amnesty to people using the KPMG tax haven scheme was genuine – even though a signed copy of the letter is posted on the CBC website.
What’s clear from the report is that the only way we are going to get action on tax havens and tax evasion is by supporting efforts to keep these problems in the public eye.