Offshore Tax Havens and Loopholes Are Holding Us Back
A recent documentary by the investigative television program, the Fifth Estate, sheds new light on the KPMG scandal that helped wealthy Canadians use an offshore tax haven to hide money from Revenue Canada. It shows how clients used a shell company on the Isle of Mann along with tax exemptions available for monetary gifts as a way to avoid paying taxes on large sums of money. During the program an informant explains that he never lost control of his money through the whole process and that people who took advantage of the scheme were sworn to secrecy by KPMG.
KPMG denies the charges, while Revenue Canada has called the scheme a sham. Despite that assertion, the tax agency came up with a sweetheart amnesty deal for the wealthy Canadians who were caught using the scheme. Keep in mind that amnesty isn’t an option for most Canadians with tax problems. Smaller accounts routinely get prosecuted to the fullest and those Canadians feel the sting of the agency’s powers. The KPMG decision showcases a double standard that most people are weary of.
The Liberals campaigned on a promise to close tax loopholes, but so far there has been no action on this front. That means stock option deductions, offshore tax havens, and corporate tax giveaways continue to shortchange the government while the tax burden is carried by hard-working Canadians who don’t have the opportunity or the resources to get a free ride.
Right now, Canada’s tax code is riddled with loopholes. A recent study by the Canadian Centre for Policy Alternatives showed how 59 tax measures that only benefit people above the average income level cost the government more than $100 billion in 2011 alone. The wealth of the ultra-rich in Canada includes salaries, bonuses, share grants and stock options that are aided by these loopholes.
Since the election, lobbyists have aggressively encouraged the government to keep these tax loopholes so the richest Canadians could protect their wealth. But these foregone revenues significantly undermine the government’s ability to provide funding for urgent priorities like affordable housing, public transit, healthcare, green infrastructure, education and other public services. That’s why New Democrats brought a motion to the House of Commons calling for a full investigation into the debacle including the role of the Canada Revenue Agency and to bring about tax fairness so our economy can work for everyone - not just those at the top. The motion passed but it remains to be seen if the government’s commitment is firm.
As we lag behind other G8 countries in our efforts to fight back against the use of tax havens, the gap between the wealthy and well-connected and all other Canadians is only growing. It is estimated that Canada is missing out as much as $8 billion a year because of offshore tax havens alone. We need to work to close that gap and build a more equal society in Canada if we are going to address shortfalls, like the $155 million it would take to give First Nations children the same level of social services that other Canadian kids receive. When thought about that way, it’s clear that it’s time to make sure everyone contributes so more of us can benefit.