Canada failing to fight tax cheats, watchdog warns

Canadians have seen few signs that the federal government is meaningfully cracking down on international tax avoidance and evasion, a tax fairness watchdog warned on the fourth anniversary of the Panama Papers leak.

“Other countries have taken tax evaders to court and recovered billions from the Panama leaks, but despite some tough talk from this government, there hasn’t been a single conviction,” Toby Sanger, director of Canadians for Tax Fairness, said. “This lack of progress sends a message to tax evaders and their enablers that you can avoid detection and punishment in Canada.”

“The health and economic crisis caused by Covid-19 shows the necessity of having well financed public institutions and a strong social safety net,” said William Ross, coordinator at Échec aux Paradis Fiscaux. “With billions of dollars missing every year, the use of tax havens has dramatic consequences on the chronic underfunding of these institutions. Today, we see that it becomes a question of life or death.”

The groups are calling for heightened action from the federal government to crack down on tax havens.

Some of their recommended measures include:

—Introduce harsher penalties for wealthy individuals and corporations who engage in tax evasion and for the professional promoters and enablers of tax evasion schemes including legal and accounting firms

—Reform Canadian tax laws and international tax rules to force international corporations to pay their fair share of tax

—Provide the Canada Revenue Agency with the necessary resources to improve investigation and prosecution of high-level tax avoidance schemes

“Canada loses billions every year to tax haven use by rich individuals and corporations,” concludes Sanger. “At a time when we need every revenue source available to respond to the global pandemic and its economic fallout, it is shameful that billions in Canadian wealth remain hidden offshore. The government must step up its fight against tax havens, so it can invest in the programs and services urgently needed.”

An independent review of the Canada Revenue Agency found that going after aggressive tax avoiders is a laborious task.

“Once a high-risk taxpayer has been identified, it is often necessary to obtain further information in the course of an audit to support an accurate reassessment,” according to a report by the independent Offshore Compliance Advisory Committee. “While CRA has broad powers to audit taxpayers and demand information, taxpayers have the right to challenge CRA demands for information in the courts and, while CRA may prevail in the end, the process uses scarce resources and produces delay (as no doubt intended by the taxpayers).”

“Applications for judicial review of CRA requirements to produce information or documents can cause delays for months, particularly if all rights of appeal are exercised,” the report added. “Information requests under the Access to Information Act in the course of an audit can also produce delay. In addition to delaying the audit, these tactics similarly consume resources which could be applied to other, pending cases.”

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