The Harper government's tough posture and weak rules on tax havens

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There is something almost quaint about the little ritual we go through every year at tax time.

Ordinary citizens diligently spend hours calculating their income and deductions and meticulously filling out forms, fearful of the probing eye and relentless reach of the tax man. At the same time, some of our richest citizens quietly park billions of dollars on faraway islands where the sun delightfully reaches but the tax man delightfully doesn't.

The enormity of the scam that tax havens offer the tax-evading rich -- and the horrendous hole they leave in national coffers around the world -- has long been known and largely ignored, even as governments obsess about the resulting deficits. That's because the rich have managed to convince us that the shortfalls should be made up by the hapless saps who diligently fill out their returns, and by government employees who have the audacity not to be working in the private sector.

Tax havens have grown explosively in the last few decades, but last week's spectacular leak of tax haven documents could mean the gig is about to be up. 

The documents provide details of offshore accounts held by tens of thousands of corporations and individuals -- all from just two of the more than fifty tax havens, which hold an estimated $32 trillion in offshore money.

The stunning disclosure puts considerable pressure on governments to finally show some muscle against their tax-evading citizens.

With 450 Canadians identified -- and estimates of an annual revenue loss of $8 billion from tax havens, according to Canadians for Tax Fairness -- even the Harper government could be obliged to overcome its reluctance to go after wealthy cheats.

Ironically, the Harperites like to present themselves as tough on evaders -- an image they pumped up in last month's budget, introducing a turn-in-a-tax-cheat snitch line.

And back in 2007, the Harper government launched a campaign to push tax haven countries to sign bilateral tax treaties with Canada, ostensibly to force them to divulge information about offshore accounts held by Canadians.

In reality, the treaty rules were so poorly designed they've been virtually useless in making it harder for Canadians to hide money offshore.

On the contrary, they've actually opened the floodgates to tax haven use. That's because, once a tax haven country has signed one of these (largely useless) bilateral treaties, it qualifies for special treatment under the new Harper rules, allowing multinational corporations to route their profits through the tax haven, thereby avoiding Canadian corporate tax.

For the Harperites to claim they're clamping down on tax havens would be like claiming a clampdown on bank robberies by setting up a turn-in-a-robber snitch line, while at the same time providing robbers with instruction manuals on cracking safes.

If the Harper government had any genuine interest in tackling tax havens, it would get behind growing global efforts to shut them down. Even the U.S. Congress passed a sweeping law, to take effect next year, requiring foreign banks to report all assets held by their U.S. clients to U.S. tax authorities.

A plan to develop an international system along these lines, long championed by the U.K.-based Tax Justice Network, has fresh momentum in the wake of last week's revelations.

Such a system would be similar to -- and no more complicated than -- the international system of passports. All governments identify everyone entering their country when the person's passport is electronically scanned at the border. Similarly, all banks could electronically report all their clients' accounts to relevant tax authorities (as they already do domestically).

Tax haven users -- who include a rogue's gallery of money launderers, fraud artists, embezzlers, organized criminals, drug and human traffickers, as well as wealthy tax-evading individuals and corporations -- would then find it no easier to move money undetected around the world than to travel without a passport.

But why would our government bother supporting serious global efforts to eliminate a system that facilitates despicable crimes and robs national treasuries, when it can look tough by crossing its fingers and hoping to catch a few cheats with a snitch line?

Linda McQuaig is author, with Neil Brooks, of The Trouble with Billionaires: How the Super-Rich Hijacked the World and How We Can Take It Back.

Photo: Canadian Pacific/Flickr

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