Crack down on global tax havens
TheStar.com – Opinion/Editorials – The leak of records from Mossack Fonseca, a global law firm that specializes in parking money in tax-friendly’ jurisdictions, has shed light on one of the financial world’s closely held secrets.
Apr 04 2016. Editorial
No one really knows how much “dark money” is stashed away in the world’s many tax havens. That’s for the rich to know and the rest of us to guess at. It’s been a dirty secret that costs Canada billions a year in foregone tax revenues, and leaves us collectively the poorer for it.
Now the Star’s Robert Cribb, Marco Chown Oved and Tanya Talaga are peeling back the curtain on dodgy dealings by the famous and not-so-famous, in a deeply revealing series of articles in coordination with the International Consortium of Investigative Journalists. Their findings validate Prime Minister Justin Trudeau’s get-tough approach to tax cheats, and invite the new Liberal government to take a harder look at individual and corporate tax avoiders as well.
The leak of 11.5 million records held by Mossack Fonseca, a Panama-based global law firm that specializes in legally parking money in “tax-friendly” jurisdictions, has shed fresh light on one of the financial world’s closely held secrets. The documents, including information on 350 Canadians, were initially given to the German newspaper Süddeutsche Zeitung and shared with members of the consortium.
The byzantine offshore tax-avoidance industry has always been a go-to place for money laundering, tax evasion and terror funding. But even the legal industry costs us big time. As the Star series points out, some get to play by different rules than the rest of us. That’s unfair.
Affluent Canadians and corporations have some $200 billion in declared assets stashed away in tax havens, costing government as much as $8 billion a year in foregone revenue. And it’s all legal.
Globally, the London-based Tax Justice Network says a stunning $31 trillion may be stashed away, for a tax loss approaching $280 billion, all to the benefit of the well-connected and well-heeled. The Mossack Fonseca records include companies with links to Russian President Vladimir Putin’s cronies, the Chinese leader’s family, and leaders in Ukraine, Iceland, Pakistan and Saudi Arabia, in addition to business people, criminals, celebrities and sports stars.
All this is a burdensome drag on public finances, eating into society’s ability to fund education, health, pensions and other vital services. It also skews the tax load, pushing more of it onto sectors of society that are less able to carry the freight.
As the Star wrote three years ago, there’s a “growing clamour for a crackdown on offshore accounts” that lawmakers ignore at their peril. “It’s the kind of unfairness that fuelled the Occupy movement and shakes public confidence in the tax system.”
To its credit, the Trudeau government has outlined plans in its first budget to invest some $800 million in the Canada Revenue Agency over the next five years to crack down on individual tax dodgers and collect tax debts. Ottawa hopes to bank $10 billion in the process. Going after the big fish is an important step in restoring confidence in the fairness and the integrity of the tax system.
But as the Star series underscores, the underlying problem of tax havens requires global action.
Apart from cracking down on outright cheats, the major economies need to rethink tax treaties that allow jurisdictions such as Barbados, Costa Rica, Cyprus, Hong Kong, British territories like the British Virgin Islands, Ireland, Luxembourg, the Netherlands and Switzerland to flourish as tax havens. There needs to be a lot more transparency and accountability about the tens of trillions of dollars that are being routed through these havens, or parked there, to avoid paying taxes. The Organization for Economic Co-operation and Development has drawn up plans to address global tax avoidance by multinational corporations, but it’s very much a work in progress.
There’s some concern, too, that Canada is adding to the global problem by making it too easy to create shell companies here.
Welcome as the Trudeau crackdown is, it has barely begun to address the damage dark money is doing by sapping national treasuries, abetting crime and compounding tax injustice. Ottawa can push harder in the direction of fairness, and must.
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Tags: economy, featured, globalization, ideology, jurisdiction, privatization, standard of living, tax
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