Canadian money in tax havens is at an all time high - $160 billion at last count.. and growing. One of the main reasons rich Canadians and large corporations hide their money in tax havens is to avoid paying their fair share of taxes. How much are we losing? It is hard to say but we think it adds up to tens of billions of dollars.
That's not likely to change if today's Federal Finance Committee Report on Tax Havens has anything to say about it.
The report contains 11 recommendations. All of them weak, unimaginative and unlikely to recover any revenue from the untaxed $160 billion that is currently sitting off shore.
They are also breathtakingly out of step with other G8 countries who have recognized the debilitating impact havens have on their economies. Conservative British Prime Minister Cameron has said tax havens will be one of the top agenda items when he hosts the G8 Summit in June. The United States, the European Union and Australia are all taking steps to tackle tax havens. In the absence of strong recommendations from the Finance Committee let's hope peer pressure from other governments might get Canada moving on this issue.
Combined with this week's other financial news about $29 Billion in uncollected taxes, you have to wonder how seriously government takes its role of financial stewardship.
The Conservative members of the Finance Committee only had to look as far as their own Federal Budget for cues to support for stronger action. That’s why their reticence is so perplexing. This is about the administering Canada’s money with wisdom and care. It transcends partisanship or politics.
The NDP and Liberals included supplementary opinions which had a number of stronger recommendations including support for automatic tax information exchange and a call for an official tax gap estimate. These are not radical ideas. G20 Finance Ministers recently endorsed automatic tax information exchange and many OECD countries regularly issue tax gap estimates. It is part of the modernization of government’s protecting the public purse.
It is not surprising, though, that they balked at calling for increasing the capacity of the Canada Revenue Agency to go after tax cheats using tax havens as this would have drawn unwelcome attention to the false economies of cuts to CRA funding in the recent federal budget. But there is no disputing the CRA’s own figures that show small investments in tracking and monitoring reap investments threefold or more.
The Finance Committee Report itself is compelling reading and clearly shows we have a big and growing problem in tax havens. But it is deeply disappointing that the recommendations fall so far short of what is needed to tackle this challenge.