How the Bloc Québécois can promote tax fairness

Gabriel Ste-Marie Bloc Québécois
Presentation to the the team of Bloc Québécois finance critic Gabriel Ste-Marie
 
10 September 2020
 
By Toby Sanger
 

 
INTRODUCTION
 
First of all, we would like to commend you on some of the tax fairness measures that your office and party has raised and helped advocate.
 
Canadians for Tax Fairness was happy to see in the last election that the Bloc proposed to tax the revenue of large tech companies and to apply the GST to all transactions of e-commerce companies in Canada, regardless of platform. In addition to a digital tax, we were encouraged to see the Bloc support providing more funds to CRA to increase tax compliance, including of large multinationals.
 
We were also pleased to see the Bloc platform include stronger action against climate change, including calling for an end to fossil fuel subsidies, supporting the carbon pricing system and proposing tax credits for renovations of residential buildings and farms.
 
More recently, it was great to see the Bloc put pressure on the Trudeau government regarding the use of public funds for corporations that use tax havens. Mr. Ste-Marie made some excellent points in QP and special COVID meetings this spring about the need to tighten rules around tax havens. After the steps taken by France and Denmark, the Bloc helped keep this issue in the news.
 
On this subject, we think all of us here are especially aligned and hope we can continue to keep the pressure on the government to do more to tackle offshore tax dodging.
 
Although tackling tax havens continues to be a priority for us, there are other tax fairness measures that we are planning on focusing on in this Parliament.

 
DIGITAL TAX
 
The world’s largest e-commerce corporations have seen their revenues and profits soar during this pandemic even as mainstreet businesses have shuttered. We are pushing to see the government bring in a digital tax of at least 3% on revenues multinational tech giants derive from Canadian consumers and users. But also, to ensure that the GST is applied to imports of digital services, including advertising. We also want to see it remove the business deductibility for advertising expenses available to foreign internet platforms

 
CLOSING TAX LOOPHOLES
 
COVID-19 has worsened inequalities and now more than ever, we need progressive tax reform to help address these gaps and raise revenues to invest in important programs. As such, we are continuing to campaign for the government to close tax loopholes and expenditures that overwhelmingly benefit higher income and pay out to the wealthiest Canadians. These legal but regressive loopholes cost billions in lost revenues.
 
We are asking the government to:
  • Completely eliminate the stock option tax deduction, which is one of the most regressive loopholes, as over 90 per cent of the value of this $1 billion loophole goes to the top 1 percent and two-thirds goes to the top 0.01% richest Canadians
  • Eliminate the business entertainment expense deduction
  • Reduce the dividend tax credit
  • Cap tax-free savings accounts at a lifetime level of $70,000
  • Increase the inclusion rate for capital gains
  • Limit business deductions to no more than $1 million for each executive or employee
 
WEALTH TAX
 
This year, we are also focusing on promoting a wealth tax on the super rich. A recent study by the PBO showed the wealthiest 1% have more than a quarter of all wealth in Canada. While most Canadians are struggling through this pandemic, many billionaires have seen their wealth grow even more. We are going to be releasing a report in October that looks at wealth concentration among Canada’s billionaires, and explores how much a wealth tax could generate on these fortunes.
 
An annual wealth tax at a modest rate of just 1% on fortunes of over $10 million would generate over $10 billion annually. Three-quarters of Canadians polled, including majorities from all political parties support having a wealth tax.

 
EXCESS PROFITS TAX
 
Another disparity that has arisen in recent months due to COVID-19 is that while businesses are struggling, a handful of others are doing very well, and increasing their market share. Just as it did during previous world wars, the government should consider an excess profits tax on large corporations that have significantly profited during the pandemic.

 
TAX HAVENS
 
Of course we are also continuing our work on tax havens. This summer we released a report showing Canadian corporate assets in tax havens reached $380 billion. We are also planning another report that looks into Canada’s long-term care sector and ties to tax havens. Now especially with COVID-19, and some action internationally by governments of France, Denmark, we think there is a greater opportunity to put pressure on the government to make important reforms.
 
We are specifically recommending the government:
  • Treat large corporations including multinationals as single entities for tax purposes so they can’t use subsidiaries and affiliated companies to avoid taxes
  • Support the introduction of a minimum international corporate tax rate
  • Allocate profits of multinational corporations between jurisdictions based on real economic factors such as sales and employment, as is done between provinces in Canada
  • Restrict interest deductibility to no more than 20% of corporate earnings (EBITDA), in line with the OECD’s recommendations
  • Place strict limits on use of intellectual property to shift profits to low-tax jurisdictions.  
  • Terminate end double non-taxation agreements with tax havens
  • Invest in additional resources to investigate and prosecute corporate offshore tax dodging, and increase penalties against corporations that evade taxes and professional accounting firms that promote them
 
CORPORATE TRANSPARENCY
 
We are also pushing for more corporate transparency, including establishing a public registry of beneficial owners for private corporations. Other governments such as Ukraine, UK have already set up public registries as a tool to combat corruption, money laundering and tax evasion.
 
We are working with Transparency International Canada and Publish What You Pay Canada to promote greater transparency of who owns and controls private corporations. This week, our coalition is releasing a handbook on the need for a public registry in Canada.
 
We are seeing some progress in different provinces. B.C. undertook consultations for a public registry for companies. It was the first province to adopt a public registry for real estate to tackle money laundering and rising housing prices. Quebec in its budget last year announced it will make beneficial ownership information public and searchable.

 
IMPROVE BENEFITS FOR LOW-INCOME AND VULNERABLE CANADIANS
 
Another issue that has been highlighted in the pandemic is the need to strengthen income supports for Canadians and how those supports are delivered. One in 10 individuals in Canada do not file their taxes and therefore do not receive important income supports that are integral to the government’s anti-poverty strategy. COVID-19 has further complicated the situation for Canadians who rely on community-run volunteer tax clinics to file their taxes. Many of these individuals, such as seniors, Indigenous and remote communities, or people with disabilities, are also most susceptible to the virus.
 
The federal government should ensure that benefits continue to be delivered for as long as it remains unsafe for vulnerable Canadians to receive in-person support to file their taxes. Longer-term, it should modernize and simplify the tax system.
 
Other countries including Denmark and Norway have reduced the cost and frustration of tax filing by providing automatic tax filing for citizens. This crisis is an opportunity for Canada to also move to automatic tax filing beginning with the most vulnerable tax filers and then extending this option to all Canadians.
 
 
CONCLUSION
 
These are just some of the campaigns that we are going to be promoting this coming year. We would be interested to know if any of these issues are of interest to your office. We would also be interested to know what other tax issues you plan to make a priority this Parliament.