Parliamentary Budget Officer Yves Giroux, centre, discusses the findings of the PBO’s report on the international tax gap at a Finance Committee June 20, 2019.
Tax avoidance costing Canada up to $25B a year: Parliamentary Budget Officer
For Immediate Release - June 20, 2019
For the second time this week, experts are sounding the alarm on the multi-billion-dollar cost of tax dodging. Today’s Parliamentary Budget Officer’s report suggests Canada is losing up to $25 billion or more a year in tax revenues from multinational corporations avoiding taxes through tax havens.
“Canadians are being robbed of investments to health care, childcare, education and green infrastructure – all of which the government could afford if it were to get serious about cracking down on tax avoidance,” said Toby Sanger, executive director of Canadians for Tax Fairness.
The PBO’s findings add to a similar report this week from the Canada Revenue Agency that estimated corporations are responsible for at least $10 billion -- 40% of the federal government’s estimated $24-billion overall tax gap.
Estimates vary because data is difficult to obtain. Other organizations and experts, including the International Monetary Fund, have also developed estimates ranging from about $4 billion up to $20 billion or more. The IMF estimated that OECD countries lose on average 1% of their GDP to international corporate tax shifting, which would peg this amount at $20 billion, but other estimates are lower. In a Finance Committee today, PBO Yves Giroux remarked that analyzing offshore tax avoidance was as difficult as investigating organized crime.
Canadians for Tax Fairness proposes several recommendations to address international tax avoidance, including:
1. Greater transparency on corporate finances and financial flows.
Canada has the weakest corporate transparency rules in the G20 and we need stronger measures, including revealing who owns what companies with a public register of beneficial owners as well as public country by country reporting of corporate finances and taxes paid.
2. Stronger action and support of proposals to reduce international corporate tax dodging, avoidance and evasion.
While the federal government has increased enforcement and implemented some measures through the OECD’s Base Erosion and Profit Shifting initiative, many other major countries are taking stronger action to recover taxes from multinational corporations that are using tax havens to avoid paying their fair of taxes. We’ve urged the federal government to:
- Take steps to ensure corporate income is taxed where economic activity takes place. This is exactly what this PBO report suggests, what the Commons Trade Committee recommended last year, what Private Members Bill C-362 would help achieve, and what other countries are doing and proposing through the G20 and OECD. Unfortunately, Canada hasn’t taken any action in this area or demonstrated support for positive proposals that would achieve this OECD and G20.
- Support measures to implement a minimum international corporate tax rate.
- Increase penalties for those guilty of tax evasion
- Increase funding for investigation, audit, enforcement and prosecution of offshore tax evasion.
- Restrict corporations or consortiums that engage in tax evasion and aggressive international tax avoidance from obtaining federal government contracts.
- End double non-taxation agreements with tax havens.
Canadians for Tax Fairness has more detailed proposals to address this issue in our Platform for Tax Fairness.
“Canada is missing out on the opportunity to take action on an international level, where other G20 leaders are stepping up efforts to remove secrecy and recover taxes from multinational corporations using tax havens.”
Canadians for Tax Fairness advocates for fair and progressive tax policies aimed at building a strong and sustainable economy, reducing inequalities and funding quality public services.