Cracking down on offshore tax dodgers should be budget priority

Posted on March 16, 2013 in Governance Debates – – opinion/edtorials – By some estimates affluent Canadians have pumped $160 billion into offshore havens, avoiding nearly $8 billion in taxes annually. It’s time for a crackdown.
Mar 13 2013.

There’s testiness on Parliament Hill as budget season draws near and Prime Minister Stephen Harper’s government gets ready to administer the latest wallop of pain in its bid to erase the $20 billion-plus federal deficit before the next election. Understandably, the opposition wants some assurance that the most affluent among us are carrying their fair share of the burden.

But getting that assurance isn’t as easy as one might hope.
While Finance Minister Jim Flaherty insists that the Canada Revenue Agency is “unforgiving” on Canadians who evade taxes by hiding money in offshore tax havens, for example, the opposition isn’t convinced. Liberal Senator Percy Downe, a longtime critic of the CRA, says the agency isn’t chasing down offenders “with any great vigour.” And the agency has yet to provide any figures that would contradict that assessment.

When outgoing Parliamentary Budget Officer Kevin Page asked CRA for information to prepare an estimate of how much illegal tax dodging costs the federal government, the agency was less than forthcoming. Downe called it “stonewalling.” Revenue Minister Gail Shea says it’s “almost impossible to calculate” the tax gap, although CRA says audits of 8,000 international cases since 2006 have identified $4.5 billion in unpaid taxes.

That could be the tip of an iceberg. Canadians for Tax Fairness, a group that campaigns for sharing the burden equitably, estimates that affluent Canadians have pumped $160 billion into offshore havens, avoiding nearly $8 billion in taxes annually. Without harder numbers from CRA, there’s no way to know for sure how much cheating may be going on. Inevitably, this has fueled calls for a “clampdown” on tax havens.

This isn’t just a Canadian issue. In the United States the Congressional Research Service recently pegged the potential loss to offshore havens at $100 billion a year. And the international Tax Justice Network estimates that the super rich have stashed $20 trillion or more in offshore accounts, dodging $200 billion or more a year in taxes. It would be good to know the equivalent Canadian number, if only to justify some tightening up by Ottawa, including giving CRA the extra resources it needs to chase down offenders.

Pressed on the issue, Flaherty concedes that some Canadians aren’t paying “their fair share,” and that Ottawa is “looking at that side of it” with an eye to cracking down on loopholes. Let’s hope so. As Downe says, CRA is quick to track down carpenters and waitresses for not paying taxes. We need to see the same sort of zeal applied to the wealthy, as well.

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