In 2011, CPJ helped establish a new organization called Canadians for Tax Fairness . In this article, Dennis Howlett highlights the Tackle Tax Havens campaign. CPJ believes that fair taxation enables societies and government to fulfill their public justice responsibility by funding programs that promote the common good. Tax havens are an affront to this notion as they allow certain individuals and corporations to evade their responsibility to pay their fair share.
I would like you to meet the Canadian Tax Dollar, the mascot for the Tackle Tax Havens campaign. He has been sent off to a tax haven by some wealthy individuals and large corporations in order to avoid paying taxes. He had a good time at first, but now he is homesick and wants to come home so he can do something useful, like help fund health care or education.
Canadians for Tax Fairness has launched the Canadian Tackle Tax Havens campaign to raise public awareness about the growing problem of tax evasion due to tax havens, and to press the government to do more to stop cheats and support international efforts to regulate tax havens.
What is a tax haven?
A tax haven is a country or territory which has low tax rates or no taxes at all. Some individuals and corporations funnel their money through offshore tax havens in order to avoid paying taxes in Canada.
How many Canadian tax dollars are we losing to tax havens? No one knows for sure, but it is likely in the tens of billions of dollars. There are three independent estimates that put the figure as high as $80 billion a year that federal and provincial governments are losing to various forms of tax evasion. A recent Statistics Canada report showed that a quarter of all Canadian direct investment abroad was going to countries that have been identified as tax havens. Barbados was the destination for $53 billion in 2011. While some of this may have gone to building a resort, it is a safe bet that most of it was going there to avoid paying taxes.
We know it is a big problem but we don’t know just how big it is. So one of the first things we need to do is get a better fix on the size of the tax gap in Canada.
What can we do?
Canadians for Tax Fairness is distributing an electronic post card from the Canadian Tax Dollar asking supporters to press the government to publish an official estimate of the size of the tax evasion problem including the impact of tax havens. If MPs knew how much money we were losing, it would spur them to take action.
A number of other countries, including Australia, UK, US, and Italy have done this and it has led to stepped-up efforts to go after tax havens.
Canada is not doing enough to go after tax cheats who are using tax havens. A relatively small number of auditors are assigned to the international tax audit program and layoffs of public servants announced in the 2012 Federal Budget threaten to reduce this number. It is a false economy to be cutting back resources in this area. When the federal government increased the capacity of the Canada Revenue Agency to combat aggressive international tax evasion by $30 million in 2005, they raised an additional $2.5 billion in revenue over four years.
The second thing we need to do is to get the government to increase, not decrease, the capacity of the Canada Revenue Agency to go after those using tax havens to avoid paying their fair share of taxes.
Tax havens harm people everywhere
Tax havens also harm developing countries. It is estimated that ten times as much money is flowing out of developing countries as a result of transfer pricing by multinational corporations, corruption and capital flight, than they receive in aid. Much of the illegal flow of money from developing countries is facilitated by tax havens. Tax havens also facilitate money laundering by drug lords and organized crime.
Curbing tax havens will also require international action. Canada needs to support efforts underway in the United Nations Tax Committee and the G20. But there are steps Canada can take on its own to tackle tax havens.
Imagine if we were able to bring the tens of billions of our tax dollars who are stuck in tax havens home. The painful cuts to our social programs would be unnecessary. The deficit could be eliminated. And we might even have the funds we need to implement a national poverty elimination plan.
For more information, check out CPJ’s Taxes and the Common Good.