New federal conditions a step forward but fail to address corporate tax dodging

Photo: An advertisement for the government's Large Employer Emergency Financing Facility. Conditions for financing fall short on preventing large companies that don’t pay their fair share of taxes from receiving funding.

By Erika Beauchesne

21 May 2020

The federal government has revealed additional conditions large employers will need to meet to qualify for funding under the Large Employer Emergency Financing Facility (LEEFF). While they’ve responded to some of the concerns Canadians for Tax Fairness and others have raised, much more should be done.

To be eligible for funding, companies must commit to minimize loss of employment, fulfill obligations for pension plans and collective bargaining agreements, and publish an annual climate related financial disclosure report. Companies are restricted from engaging in stock buybacks, issuing dividends and must limit executive compensation.  These were measures we and our supporters pushed the federal government to adopt and we’re glad they done so for this program. 

However, these conditions fall short on preventing large companies that don’t pay their fair share of taxes from receiving federal funding. While the criteria state that corporations that have been found criminally guilty of tax evasion can’t apply, the reality is that there are no large corporations in Canada that have recently been criminally convicted of tax evasion—so this is meaningless.

While the Canada Revenue Agency frequently prosecutes smaller businesses and individuals for tax evasion, no large corporations have been successfully prosecuted.  Instead they may be taken to tax court for “reassessments” in which the company too often wins.  As we’ve pointed out many times before, corporations regularly use tax havens to engage in aggressive tax avoidance without being prosecuted for tax evasion. That’s why we called for the federal government to deny funding for corporations that engage in aggressive tax avoidance using tax havens, and not just tax evasion. If the government wants to get serious about restricting aid from tax dodging corporations, it needs to set higher standards for corporate transparency and follow through with significant deterrents.

The federal government should publish which companies are receiving public funding, how much and what for, only under the LEEFF program but for all forms of financial support. We should be able to ensure that all public funding --through loans, direct supports, or government contracts— is going to help workers, to provide necessary goods and services, and not used for profiteering.

Requiring multinationals to publicly disclose where they have subsidiaries and how much profit and tax they pay in each jurisdiction can help determine who is evading or avoiding taxes at home.   Of course, we also need reforms in place to prevent tax dodging—but a little more transparency is an important and necessary place to start!

It’s been said that sunlight is the best disinfectant. To make sure public money isn’t helping out companies and executives that hide their profits offshore, we need stronger corporate transparency rules and much greater accountability for the individuals and businesses who fail to meet those standards.