Government tax gap underestimates losses from tax haven use by wealthy individuals

These are serious crimes and it is time for serious pernalties

On June 28th the Federal Government released a report estimating the loss of federal taxes due to tax haven use by wealthy individuals: between $0.8 billion to $3.0 billion per year.

According to Canadians for Tax Fairness these estimates are low; $3billion is the bottom, not the top of that range. Recognized international methodologies put the losses closer to $5 to $7.5 billion. Individual tax haven use is approximately 1/3 of the problem; corporate abuse of tax havens is at least double that. In fall of 2017 C4TF released their estimates of the corporate numbers: Canadians are losing $10 to $15 billion each year.

The government estimates don't include illegal funds, or ‘dark money.’ Canadians don't know how much illicit money is flowing in and out of Canada because we don’t have transparency on the hidden or ‘beneficial’ owners of companies in Canada.

While C4TF applauds the CRA for finally conducting this tax gap analysis, unfortunately it is being done piecemeal. The GST and domestic individual gaps were estimated separately while the corporate gap is yet to be released. With this fragmentation, Canadians cannot see the full scale of the problem.

The government should take immediate action to combat this tax evasion by the wealthy, including:

  • International cooperation on transparency and information exchange including a public beneficial ownership registry.
  • Stepped up enforcement and prosecution - too many individuals are being let off the hook, some with no penalty at all. These are serious crimes, equivalent to bank robbery, but with much broader social consequences for us all. These crimes deserve more serious penalties, including appropriate jail time.
  • Aggressive action against the facilitators - the wealthy are not hiding money on this scale without the help of teams of lawyers and accountants. When the government takes this seriously, they will also enforce penalties and prosecutions for those who facilitate tax evasion and aggressive tax avoidance.

Canada has a double standard; white-collar criminals are being let off the hook. Polling has shown Canadians believe there is one tax system for the rich and another for the rest of us. Our government can restore our faith with one tax system for us all.