It’s rare that members of Canada’s financial elite are so clumsy in revealing that their cage has been rattled.
Seemingly out of the blue this week, the head honchos of Canada’s biggest companies, the Canadian Council of Chief Executives, put out a media release insisting that their taxes are not too low.
This defensive posture — who mentioned murder? — reveals they fear others may be slowly catching on to the massive transfer of wealth to the richest Canadians that’s been going on for the past 14 years due to the systematic cutting of corporate tax rates.
If Canada’s corporate tax rate was the same today as it was in 2000, we’d be collecting roughly an extra $20 billion a year in taxes — enough to fund national child care, free university tuition, children’s dental care or other programs that have long existed in other advanced countries but that no one here, in these lean and mean times, dares to be caught dreaming about anymore, let alone advocating out loud.
Of course, all that corporate tax-cutting was done in the name of strengthening the Canadian economy and creating jobs. I guess that explains why we all feel so much better off than we did in 2000, right?
For years now, all the oxygen in public commentary about taxes has been sucked up by a rabid anti-tax movement, funded by corporate and wealthy interests. Organizations like the Canadian Taxpayers Federation and the National Citizens Coalition have been allowed to hold court in the media as if they were simply disinterested outfits representing ordinary people. Their huge anti-tax bullhorn has been amplified by in-house commentators from the business press and then reiterated by Harper government spokespeople, all within the closed echo chamber known as “public debate.”
But recent rumblings from the long-silenced progressive side of the tax debate have threatened to shake things up.
In Britain, an aggressive campaign against corporate freeloading has exposed how some well-known mega-multinationals — Starbucks, Amazon, Google — manage to avoid huge amounts of tax by shifting profits to offshore tax havens.
Young Brits, reeling from government austerity cuts and insufficiently distracted by reports about the royal baby, have demonstrated noisily in front of Starbucks outlets. And following fierce criticism from a parliamentary committee and an admonition from Prime Minister David Cameron that corporate tax dodgers should “wake up and smell the coffee,” Starbucks voluntarily paid £10 million in British taxes.
Fearful such a dangerous precedent could spread to Canada, some Canadian CEOs were undoubtedly flustered when they woke up a few weeks ago to CBC Radio’s Michael Enright interviewing Dennis Howlett, executive director of an ominous-sounding group called Canadians for Tax Fairness. Howlett described how Canadian corporations avoid billions in taxes by shifting profits offshore — exactly the phenomenon that’s caused outrage in Britain.
Howlett mentioned, for instance, the case of Saskatchewan-based Cameco, which sold uranium at very low prices to its Swiss-based subsidiary, which then sold the uranium to customers at much higher prices, thereby accumulating huge profits — $4.3 billion in six years — in the subsidiary, located in a particularly low-taw tax district in Switzerland.
Because of this, Cameco may have deprived the Canadian and Saskatchewan governments of some $850 million in taxes, obliging other taxpayers to make up the difference or governments to cut programs.
The Cameco case only came to light because the company is being pursued by Canada Revenue Agency, with the court outcome still pending. Such legal action is rare, since companies are usually more adept at hiding “transfer pricing” from CRA — especially since the number of CRA investigators has been dramatically cut by the Harper government.
This “transfer pricing” is standard operating procedure for multinationals in Canada and elsewhere; it’s notorious for depriving Third World governments of billions in desperately-needed cash.
Some 60 per cent of “world trade” now takes place between corporations and their subsidiaries, according to the not-exactly-left-wing OECD, which has been increasingly critical of the practice.
Nonetheless, the CBC’s interview with Howlett sparked gasps of rage from the bowels of the business press, notably Terence Corcoran in the National Post — even though a detailed description of the Cameco case and other tax avoidance schemes had just appeared in a special issue of Canadian Business under the cover headline: How to pay no taxes — Many of Canada‘s largest companies pay almost no tax: What‘s their secret?
Of course, that report, directed towards a business audience, is seen as harmless. It’s quite another matter when that information is used by the likes of Howlett to wake up the Canadian public to this wealth grab by some of our biggest corporations — companies which pushed governments to slash taxes and then largely avoided even those lower rates by shifting their profits offshore.
Among the arguments Corcoran used to discredit Howlett was that he lacked expertise in corporate tax — unlike the usual crowd of high-paid tax lawyers and accountants who routinely argue the corporate cause in the media. Furthermore, Corcoran fumed, Howlett had once worked for the National Anti-Poverty Organization.
Imagine allowing a debate over whether massive corporations should be obliged to pay their taxes to include someone with a clear bias towards the poor.
Winner of a National Newspaper Award, Linda McQuaig has been a reporter for the Globe and Mail, a columnist for the National Post and the Toronto Star and author of seven bestsellers, including Shooting the Hippo: Death by Deficit and other Canadian Myths and It’s the Crude, Dude: War, Big Oil and the Fight for the Planet. Her most recent book (co-written with Neil Brooks) is The Trouble with Billionaires: How the Super-Rich Hijacked the World, and How We Can Take It Back.
This article is reprinted with permission from iPolitics