Canada Gets a Lesson from the Cameco Trial

Cameco’s $2.2 billion tax trial starts today in Toronto. The same day that MPs from the Parliamentary Finance Committee are in Regina to consult with taxpayers about how to manage priorities in the next federal budget.
That committee need only look at the Saskatchewan case to get a clear roadmap about how to proceed. Cameco’s case is only one example of the wild growth in corporate abuse of tax havens; shifting profits offshore; creating subsidiaries with the express purpose of avoiding taxation. This deprives the government of at least $8 Billion a year.
Cameco’s offshore business plan is a master class in the corporate use of tax havens. And if MPs want to advise the Finance Minister about how to gather revenues for things that matter, Saskatchewan is key.
The resource company’s executives maintain that what they are doing is legal and in the best interest of their shareholders. That Trump-style argument is used by many of Canada’s top publicly traded companies. They hire top Bay Street lawyers and accountants to look for loopholes in Canada’s 1100-page Income Tax Act.
It is time for the Finance Minister to close those loopholes and clarify what is acceptable to Canadians. Failure to nip corporate tax avoidance in the bud is expensive as are full-blown investigations and prosecutions. But the real cost is the damage done to the integrity our tax system. Regular taxpayers – including owners of small and medium sized businesses - are starting to realize that the big guys have access to a different set of rules.

Multinationals have engaged in this practice and gambled that the complexity and expense of the investigation means that the risk of getting caught is low. Last year’s federal budget earmarked an additional $444million over five years to the CRA’s budget to turn up the heat on tax-dodging corporations and wealthy individuals.
But it will take more than money to solve this problem. The government has to be strategic in reforming corporate tax rules to stem the revenue losses due to corporate profit shifting.
Requiring “economic substance” for any offshore subsidiary to be recognized as a separate corporate entity for tax purposes would be a good start. But so far government has avoided that solution. In the last session of Parliament, many Liberal and NDP MPs voted for legislation that, if in place, would have provided clear guidance to corporations engaging in this practice. Unfortunately, the Conservative majority at that time prevented it from going forward.

It is time the Liberal government re-introduce the bill, which would go a long way to putting a stop to corporate abuse of tax havens.
There is more than $270 billion in Canadian money in the top 10 tax havens — and thanks to some very sketchy federal tax agreements, a lot of it will never be taxed.

Tax lawyers know it. Corporate CEOs know it. Whistleblowers know it. It is time that the Parliamentary Finance Committee knows it too. They should advise the Finance Minister that the 2017 Budget is the opportunity to make it right.