No country is immune from controversy regarding tax havens and tax fairness, including Canada. Recently, Canadians for Tax Fairness warned that the Canadian government is not working hard enough to fight those who cheat taxes.
The warning from Canadians for Tax Fairness came on the four-year anniversary of the Panama Papers leak. The watchdog organization pointed out that the Canadian government has not made any significant efforts following that leak.
Toby Sanger, the Canadians for Tax Fairness director, compared the reaction of the Canadian government with the actions taken by other countries. He pointed out that other countries took people named in the Panama Papers to court for tax evasion, and those efforts have recovered billions of dollars.
By contrast, the Canadian government has only engaged in serious talk. As of the four-year anniversary of the leak, there had not been any convictions. Furthermore, there were no indications that convictions would be forthcoming.
According to Sanger, this lack of action sends an undesired message to those who evade taxes, as well as those who enable them. Namely, it sends the message that if you evade taxes, you can avoid being detected and go unpunished. In other words, there are little to no consequences, which is not the message that Sanger feels should be sent.
Why It Matters
Those who agree with Sanger, including Échec aux Paradis Fiscaux coordinator William Ross, argue that given the current COVID-19 crisis, the lack of action taken by the Canadian government is even more problematic. Ross argues that this is the time when it is particularly important to have a strong social safety net, as well as public institutions with enough financing.
The criticism is that the billions of dollars that remain untaxed due to evasion annually could go a long way to helping Canada make it through the current crisis. Additionally, Ross pointed out that the history of allowing tax havens, and refusing to take steps to act on the Panama Papers earlier, has led to chronic underfunding. This has left the relevant institutions unprepared to handle the current crisis. Ross further pointed out the severity of the tax evasion’s consequences by referring to it as, “a question of life or death.”
Canadians for Tax Fairness’s Recommendations
Canadians for Tax Fairness, Échec aux Paradis Fiscaux, and other individuals and organizations in agreement, do not solely criticize without suggestions. They have recommended a range of measures to change the current situation regarding tax evasion.
One of the key recommendations is to create harsher penalties for corporations and high net-worth individuals who evade taxes. They recommend that these penalties extend to those who promote and enable tax evasion schemes, such as accounting and legal firms.
The groups also recommend reforming the Canadian tax laws as well as international tax rules in a way that will require international corporations to pay a fair amount of tax.
Additionally, the organizations suggest providing enough resources to the Canadian Revenue Agency so that they are able to improve prosecution and investigation of the tax avoidance schemes at a high level.
Further Complications in the Matter
Working to aggressively pursue tax avoiders is far from a simple task. An independent review that examined the Canadian Revenue Agency confirmed that pursuing those who aggressively avoid taxes is very laborious. The Agency must identify the high-risk taxpayer and gather additional information via an audit. While the Agency can audit taxpayers, those taxpayers can challenge demands for information. Even if the Canadian Revenue Agency wins in courts, it would use valuable resources in the fight.
Because of the difficulties associated with going after tax evaders, the situation is unlikely to change in the near future, despite criticisms from Canadians for Tax Fairness and other organizations.
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