November 16, 2012
RE: Impact of Tax Havens on Provincial Budgets
Dear Premier,
I am writing in advance of the Council of the Federation meeting in Halifax, to alert you to a critical
and growing problem: Canada is losing tens of billions of tax dollars to tax havens. And we want to
ask for your support of our Canadian Tackle Tax Havens campaign which is calling for the federal
government to step up its efforts to go after tax cheats who are using tax havens.
Statistics Canada reported recently that a quarter of all Canadian direct foreign investment abroad was
going to countries that are known to be tax havens. The small island of Barbados was the destination
for $53.3 billion Canadian dollars in 2011!
We don't know exactly how much tax revenue is being lost to tax evasion, including that facilitated by
tax havens. Several estimates have put the figure as high as $80 billion a year. Other estimates suggest
it is more like $20 billion. But we do know it is a big and growing problem.
So one of the first things that needs to be done is to get a better fix on the size of the tax evasion
problem. We need the federal government to publish an official estimate of the size of the tax evasion
problem including the impact of tax havens. A number of other countries such as Australia, the UK, the
EU, the US and Italy have done this and it has led to stepped up efforts to go after tax havens, which
have succeeded in raising additional revenue.
While curbing or eliminating tax havens requires international cooperation in fora such as the United
Nations Tax Committee and the G20, there are steps Canada can take on its own.
When the federal government increased the capacity of the Canada Revenue Agency to combat
aggressive international tax planning by $30 million in the 2005 Federal Budget, they raised an
additional $2.5 billion. The CRA international tax audit program is seriously understaffed and the
public service layoffs announced in this year's federal budget threatens to make matters worse.
We ask for your support in pressing the federal government to increase the audit and enforcement
capacity of the Canada Revenue Agency and to focus more on going after the big time tax cheats who
are using tax havens.
Provincial and territorial governments rely on the Canada Revenue Agency to raise a large part of their
revenue. They have a major stake in ensuring everyone is paying their fair share of taxes. When the
very rich and large corporations are allowed to get away without paying their share, it not only places
an unfair burden on others including small businesses and ordinary taxpayers who are not able to take
advantage of tax havens, but it undermines the very basis of our tax system which relies to a great
extent on voluntary compliance.
Provincial governments name a number of the members of the CRA Board of Management and could
help to push the agency to give more attention and resources to compliance efforts related to tax
havens.
Many provincial and territorial governments are dealing with large deficits and have been forced to
take often painful deficit reduction measures, including cuts to important critical programs such as
health care and education. If we could bring more of our Canadian tax dollars home, provincial and
territorial governments could reduce their deficits, avoid unpopular social program cuts and possibly
even have money left over to do more to reduce poverty and protect the environment.
At the Council of the Federation meeting in Halifax, Canadians for Tax Fairness will be holding a news
conference and staging some street theatre depicting pirates and buried treasure in an effort to raise
public awareness of the tax havens issue. These actions are not a protest against the Premiers but a
request for your support in pressing the federal government to do more to bring our tax dollars home so
they can do something useful.
I hope that your discussions in Halifax on the challenges facing our economy will be fruitful.
Sincerely,
Dennis Howlett
Executive Director, Canadians for Tax Fairness