Lberals Write Off $133 Million For A Single Taxpayer

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Lberals Write Off $133 Million For A Single Taxpayer

The Trudeau Liberal government's Canadian Revenue Agency (CRA) has written off $133 million for a single taxpayer.  This only came to light because of a Freedom of Information request. Even then, it was not revealed whether the write off was for a corporation or an individual. Other large write offs raised the total for fiscal 2017-18 to $209 million and $2.7 billion overall. So much for transparency.

Unsurprisingly, we once again see two tax systems - one for the rich and one for the poor. 

Sometime in the first six months of 2018, the agency wrote off more than $133 million in taxes owed by one taxpayer. It's not clear whether the recipient of the writeoff was a person or a corporation. The amount was for unspecified excise taxes or excise duties; the CRA has offered no further details. The massive writeoff is cited in a Sept. 14, 2018 internal CRA memo to explain a big jump in the total tax dollars declared uncollectible, compared with the total for the same period a year previous.

"The above total amount submitted for writeoff represents an increase of $209M in comparison to the first submission of the 2017-2018 fiscal year," says the memo, obtained by CBC News under the Access to Information Act. The increase is attributable to a few large writeoffs, including one for $133M."

The federal government applies excise taxes on fuel-inefficient vehicles, automobile air conditioners and some petroleum products. Excise duties, on the other hand, are collected on spirits, wine, beer, tobacco products and now cannabis. Excise taxes and duties in 2017-18 brought $5.9 billion into the federal treasury, mostly from alcohol. ...

The Canada Revenue Agency in 2017-18 wrote off $2.7 billion in taxes owed. That's the largest single-year sum written off by the CRA since the $2.8 billion it abandoned in both 2014-15 and 2013-14. The agency says that writing off a tax debt does not relieve a taxpayer of the obligation to pay — but it does mean no legal action will be taken unless the taxpayer's situation improves.




In the late 1990s, I remember reading an article about the CRA's predecessor, the Department of National Revenue, calling in tax assessors on Boxing Day, normally a holiday, to give then Liberal Finance Minister and future Liberal Prime Minister Paul Martin a $950 million tax write off for his Canada and contines to benefit enormously from tax havens. 

The offshore holdings of former prime minister Paul Martin's family have proliferated in the years since he left public office, documents from the Paradise Papers show.

In fact, Canada Steamship Lines, Martin's former shipping empire that he left to his sons in 2003, is one of the "largest clients" of the offshore law firm at the heart of the huge leak, according to an email exchange between firm managers in 2015.

The use of tax havens by CSL was well-documented while Martin served as finance minister from 1993-2002 and then as prime minister from 2003-06.

But the Paradise Papers leak, first made public Sunday, shows that in recent years the CSL group of companies has spawned numerous new offshore entities, shifted several subsidiaries from very-low-tax Barbados to no-tax Bermuda, and urged its offshore administrators to send little or no documentation back to Canada.

The leaked files were obtained by German newspaper Sueddeutsche Zeitung and shared with global media partners, including CBC/Radio-Canada and the Toronto Star in Canada, via the Washington-based International Consortium of Investigative Journalists. The records come largely from offshore law firm Appleby, which was founded in Bermuda but has branches in eight tax havens around the world.

The documents include spreadsheets, corporate contracts, emails and a client database that contain references to at least 20 CSL subsidiaries incorporated in tax havens:

  • A series of companies under the title FB Shipping, including Barbados-incorporated FB Shipping (III) Inc., FB Shipping (VI) Inc. and FB Shipping (X) Inc., which appear to own and register individual CSL vessels.
  • CSL Management Ltd., incorporated in Bermuda in 2012.
  • CSL Africa SL Ltd., incorporated in Bermuda in 2013.
  • CSL Tecumseh LP, formed in Bermuda in 2013.
  • IC Holding Ltd., incorporated in Barbados in 2004 but moved to Bermuda in 2012.

Another CSL offshore subsidiary, Ocean Lines Ltd., shows up in internal Appleby records profiling some of the firm's clients. The document specifies that the contact address for Bermuda-incorporated Ocean Lines is in fact CSL's headquarters in Old Montreal, and it includes details on the subsidiary's bank accounts in Bermuda and Toronto.

Then it says: "CSL wants little or no correspondence sent to them. Prefer telephone contact" with one of two employees. ...

It was widely reported going back to the mid-1990s that while under Martin's ownership, CSL used the offshore haven of Liberia as a flag-of-convenience country for many of its globally operating vessels. It also conducted much of its international business through Barbados, where the general income tax rate on foreign-owned companies is capped at 2.5 per cent.

The Paradise Papers reveal that between January 2012 and February 2013, CSL moved a half-dozen of its Barbados-registered subsidiaries to Bermuda, where the income tax rate is zero for international companies.

Martin didn't respond to multiple inquiries sent through contacts at his Montreal-based foundation.

Sean in Ottawa

It is possible that something sketchy is happening and I want to support all those screaming about tax unfairness and uneven treatment of companies by this government. But the facts here, as they are available, simply does not support that.

A write off is not just a gift, although it can be -- it is also a standard accounting practice that creditors do to keep their books accurate in terms of expected receivables. They write off debts that they have reason to believe cannot be collected in order to preserve the integrity of their receivable amounts.

All this means is that a taxpayer, necessarily a very big one, has a debt of 1.3+ million that the government believes it cannot collect. This usually happens in a bankruptcy or an insolvency. It also puts collection resources to better use. Sometimes it is permanent as in the case of a bankruptcy. Sometimes it is part of restructuring that provides a path to get more over time, preserve a company to avoid job loss or the knock on effect on other companies.

Sometimes it is a sensible decision to make where the company remains. Like for example a company with minimal assets, a number of employees and potential prospects. It may be better to back off than to press forward and bunkrupt a company throwing people out of work costing the government more while collecting almost nothing.

A write off is not a debt forgiveness. It is not an agreement that the company does not ever have to pay -- it is not even necessarily a cessation of collection efforts for a time, although that is often the case. Sometimes, backing off on liquidation that may produce a small amount may allow the debtor to recover and pay a greater sum.


There are many ways in which the Liberals and Conservatives have heavily favoured the wealthy in terms of tax payments.

A union-sponsored survey of more than 1,700 auditors and other tax professionals who work for the Canada Revenue Agency suggests that even the insiders believe the cards are stacked in favour of the rich.

Nine out of 10 surveyed agreed with this statement: "It is easier for corporations and wealthy individuals to evade and/or avoid tax responsibilities than it is for average Canadians." That's according to a summary of results released by the Professional Institute of the Public Service of Canada (PIPSC), which conducted the poll.

More than eight out of 10 of those polled agreed that "tax credits, tax exemptions, and tax loopholes disproportionately benefit corporations and wealthy Canadians compared to average Canadians." And 45 per cent agreed that CRA's mandate has been "compromised by political interference" (the survey did not define the term, leaving it up to members to interpret). ...

So knowledgeable CRA insiders were even more likely than the members of the general public — by about 10 percentage points — to believe that Canada's tax system favours the rich. ...

Three-quarters of the CRA tax professionals surveyed also agreed with the claim that "multinational corporations shift profits to low-tax regions even when there is little to no corresponding economic activity taking place in that jurisdiction."

"CRA professionals often feel outgunned by the people trying hardest to avoid taxes," says the poll report, which also argues that the computer algorithms used to replace laid-off CRA workers have unfairly focused the agency's efforts on small fry. "This increased scrutiny of average Canadians came at the expense of the agency's ability to target much larger tax avoiders, as the CRA ended up cutting some of the very experts it relied on to unravel complicated tax avoidance schemes." ...

PIPSC president Debi Daviau called the results of the poll "quite staggering." The poll report confirms "there's all kinds of loopholes that large corporations can take advantage of that little guys simply can't," she said in an interview with CBC News. ...

The findings of the survey echo those of a December 2015 report by the group Canadians for Tax Fairness, which interviewed 25 anonymous CRA auditors, fraud investigators and senior managers who oversee audits of multinational firms.

"They said that despite government's assurances that taxpayers are treated fairly, the CRA is anything but fair," said the 2015 report. "They cited the lack of agency resources, stacked up against behind-the-scenes lobbying by deep-pocketed corporations and wealthy, well-connected families."




The government has not been doing an effective job of tracking the billions in tax losses every year. 

It's no secret that many wealthy Canadians are squirrelling away fortunes offshore to avoid — or even evade — taxes.

What is secret is just how much money it's costing fellow Canadians and the national treasury each year.

That's because unlike many other countries, Canada fails to disclose or even track the full size of its "tax gap" — the difference between the government's potential tax revenue and what it actually manages to collect.

The U.S. has been tracking and publicly reporting its tax gap for more than 50 years. And now so do more than a dozen other Western countries, including the U.K., France, Germany, Australia, Sweden, Portugal, Mexico, Norway and Denmark.

The Canada Revenue Agency isn't just keeping data from the prying eyes of journalists.  The agency won't share what it does know with parliamentarians either.

"It's shameful," said Senator Percy Downe of P.E.I. "The Canada Revenue Agency is the most incompetent department ... in the government of Canada." ...

For five years, Downe has been campaigning to get the CRA to release raw data on just how much potential revenue slips through tax collectors' hands due to legal tax avoidance and outright evasion.

"We don't know — is it $40 billion, $6 billion?" said Downe, pointing to a 2017 Conference Board of Canada report that concludes the country's tax gap could be as big as $47 billion a year.

Downe spoke to CBC News and the Toronto Star, partners in the Paradise Papers collaboration with the International Consortium of Investigative Journalists, which has shed light on the activities of thousands of wealthy individuals and corporations around the globe who use offshore havens to shield money from tax collectors.


The failure to collect this tax is costing Canada jobs and funding for social programs, as well as raising the taxes of the middle class more than what they should be. 

Well-heeled Canadians have hidden up to $240.5 billion in foreign accounts and are dodging up to $3 billion a year in federal tax on those funds, according to the CRA's first ever attempt to estimate how much government revenue is lost from individuals stashing money abroad. ...

The Canada Revenue Agency arrived at the figure as part of its effort to calculate the country's "tax gap" — the difference between how much the government would collect if everyone paid what they owe, and how much the government actually takes in. ...

Squirrelling money in foreign locales to dodge tax became a hot-button issue in recent years in the wake of the Panama Papers and Paradise Papers leaks, which blew the lid on billions of dollars in worldwide tax evasion and other financial crimes taking place via the shady milieu of offshore havens.

Rough estimates by other organizations of how much money the Canadian treasury loses as a result of those hidden accounts have ranged up to $20 billion annually, but the CRA had never previously produced an official number, for which it faced criticism. A dozen other Western countries calculate their tax gaps. ...

The agency's new estimates released Thursday are rough figures only, based on crude calculations of the total amount of hidden stocks, bonds and bank accounts owned globally. That aggregate is thought to be between $6.3 trillion and $9.1 trillion as of 2013, the CRA report says, citing various academic studies.

Canadians account for anywhere from 1.2 per cent to 2.6 per cent of that wealth, the CRA says. That translates to between $75.9 billion and $240.5 billion in hidden assets, as of 2013, representing potential federal tax revenues of between $800 million and $3 billion in 2014."It's sort of on the low end of what we expected," said Gibson of Canadians for Tax Fairness. "We've done some number crunching that would put this at $5 billion to $7 billion" in lost tax, she said.

"Imagine if that money was coming into productive investments in Canada building our economy," said Diana Gibson of the advocacy group Canadians for Tax Fairness. "Imagine how many jobs you could get off of that."


The Canadian government let KPMG  even though the US convicted company executives of tax evasion. 

KPMG Canada devised what it called an  “Offshore Company Structure” for a select group of rich clients: they would claim to give away millions of dollars to a shell company supposedly out of their control and therefore wouldn’t have to pay taxes on it.

In the U.S., top KPMG officials were convicted of tax evasion schemes concocted there. But in Canada, a different scheme led to a secret amnesty deal with the Canada Revenue Agency.

A federal government inquiry vowing to get to the bottom of it went nowhere.


One of the problems is that the Liberal and Conservative governments have allowed senior CRA officials to form cozy relationships with corporate executives and lobbyists increasing the likelihood of their receiving favourable treatment. 

Senior enforcement officials from the Canada Revenue Agency were treated to private receptions at an exclusive Ottawa club, hosted by a small group of influential tax accountants that included personnel from KPMG — even as the firm was facing a CRA probe for running a $130-million tax dodge in the Isle of Man.

The two soirees took place at the posh Rideau Club in 2014 and 2015, at the same time Canada's tax agency was in confidential talks with KPMG over its refusal to hand over the names of its multimillionaire clients who used the offshore scheme.

The CRA wouldn't confirm who attended the events, and none of the known industry or government attendees contacted by CBC News would talk about them. The Rideau Club operates under a code known as the "Chatham House Rules": to encourage open discussion, you can't reveal what others say at meetings.

The CRA also has strict dictatesagainst wining and dining its staff: Employees must "not accept gifts, hospitality, or other benefits that will, or could, have a real, apparent or potential influence on your objectivity and neutrality in performing your CRA duties." Gifts of alcohol are banned, and anything worth more than $50 must be flagged.

The agency wouldn't answer specific questions about what hospitality was offered at the Rideau Club, where the menus for private receptions at the time included such sumptuous fare as scallop ceviche, duck rillettes crostini and herb-roasted rack of lamb.



    The NDP is making collecting a much greater share of the billions in tax evasion central to funding the party's social program platform.

    The federal New Democrats' fiscal plan for the fall election will be shaped by estimates of how much money Ottawa loses out on each year to international tax-avoidance schemes, the party's finance critic says.

    "The whole issue of corporate taxation will be a stronger part of what we offer to Canadians, bolstered by the PBO  (Parliamentary Budget Office) report," Julian said in an interview.

    "You will hear us repeating what was found in the PBO report. Whether that number is $10 billion or $15 billion or $20 billion or higher... And we will be talking about the fair tax system as a foundation for making the kind of investments that will make a difference in people's lives."

    Details about the NDP's fiscal approach follow last week's release of the final federal budget before October's election.

    The budget from the governing Liberals fed political debate on whether or not federal governments should strive to return the books to balance as soon as possible.

    The document showed the Liberals are in no hurry. Their budget, which emphasized a need to continue making investments, projected annual deficits of almost $20 billion in each of the next two years and contained no timeline to balance the books.


    Sean in Ottawa

    Question: I knew a person who received a tax concession from the federal government. These have to be publicly disclosed in rown documents. I was quite suprised about this. When it comes to write-offs which are not concessions but about enforcement activity this is not required. I don't say this is necessarily a way to keep quiet what is an actual concession rather than a recognition that it cannot be collected, but it could be.


    Revenue Minister Diane Lebouthillier claimed the Liberal government was "on the right track to recoup these $25 billion" from "tax cheats" turned out to a gross exaggeration if not an outright lie. A year and a half later, almost nothing has been recovered from rich tax cheats. It looks more and more like an attempt to appear that they are doing something than an actual serious effort to deal with the problem. Part of the problem is that major donors to the Liberal party, as well as the Cons of course, benefit from aggressive tax avoidance and possibly tax evasion as discussed at the end of the article. 

    Revenue Minister Diane Lebouthillier has dialled down her claim that Ottawa is close to recovering $25-billion in unpaid taxes, stating instead that is the amount of lost revenue that the Canada Revenue Agency has identified and hopes to recoup from tax cheats.

    The opposition has been hounding the federal government on the issue of tax evasion and aggressive tax avoidance since the release last month of the Paradise Papers. The leak of confidential legal and financial records showed that chief Liberal fundraiser Stephen Bronfman had had financial dealings with a trust set up in the Cayman Islands.

    Ms. Lebouthillier responded to the attacks by vigorously defending the government's effort to crack down on tax evasion and tax avoidance, arguing the CRA had already reaped the benefits of hiring hundreds of additional auditors.

    "Over the past two years, we have invested nearly $1-billion to combat tax havens. This investment has helped our efforts to recover nearly $25-billion," Ms. Lebouthillier said in the House on Nov. 6.

    In response to another question that day, she added: "Our efforts have borne fruit, as we are about to recoup $25-billion."

    However, the NDP seized on a news report in Monday's edition of La Presse, a Montreal media organization, that the CRA could not confirm that these amounts had actually been recovered from taxpayers or even estimate how much money would eventually be paid back.

    "Nobody knows where that number is coming from," NDP MP Alexandre Boulerice said during Question Period. "Does the minister know that there is a difference between identifying an amount and recovering that amount?" ...

    In an interview, Mr. Boulerice added that one of the problems with tax evasion and aggressive tax avoidance is that the transactions are often legal under the current regime. As such, he said, Canada should be reviewing its treaties with tax havens around the world.

    "We're at the point where we need to change the country's laws," Mr. Boulerice said.

    First reported in Canada by the CBC and the Toronto Star, the Paradise Papers raised questions about some of the financial arrangements of two families with strong ties to the Liberal Party of Canada, the Kolbers and the Bronfmans.

    Leo Kolber, who is now retired from the Senate, was the top fundraiser for the Liberal Party when Pierre Trudeau was prime minister. Mr. Bronfman has occupied the same position for the Liberal Party under the leadership of Justin Trudeau.

    According to the Paradise Papers, Mr. Bronfman and his family's Montreal-based investment company, Claridge Inc., were linked to an offshore trust in the Cayman Islands that was set up by Jonathan Kolber, Leo's son, who left Canada to live in Israel decades ago.

    Mr. Bronfman issued a news release after the Paradise Papers came to light to state that his only interaction with the Kolber Trust was a loan made more than 25 years ago, repaid within five months, "in full compliance with all legal requirements, including with respect to taxes."

    Sean in Ottawa

    I have advanced some thoughts here on some potential reasons for a write-off. I would like to make a policy suggestion.

    I think the conclusion that a debt is uncollectible is, in some cases, subjective.

    I suggest that, while it is understandable that the identity may be confidential more information ought to be provided.

    The government should subdivide this write off category at least into the following:

    1) write off due to bankruptcy, disolution, or where an estate has been wound up without funds to pay the debts. In other words after a final disposition of the finances of the debtor.

    2) where the government has deemed the debts unrecoverable while the debtor remains alive (if it is a living person) in business (if it is a company) or with assets being managed as in the case of a proposal in bankruptcy where the debtor is not actually bankrupt.

    It would be important for citizens to understand if this 1.3 million dollars is a write off to an entity that is continuing or one that is gone.

    It is unreasonable that we do not have this information especially as it is still broad enough not to identify the debtor. As well we should have the total of each category. This would serve a policy purpose as it would indicate if there is a possibility that these are judgment calls on behalf of the government or whether the money is definitivly gone.