Photo: flickr/ thetaxhaven

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Corporations and the wealthy are secretly storing billions in offshore bank accounts, away from the prying eye of the Canada Revenue Agency (CRA). However, doing something about this could be a priority in Ottawa this fall with a change in government says PEI Liberal Senator Percy Downe in a recent interview.

This is one issue where both opposition parties, now bitter rivals in the upcoming federal election, may find common ground in the event of a polarized elected Parliament after the balloting.

“[Whoever] gets elected in the fall, Liberal or NDP,  are [sure to be] more sensitized to this than the Conservatives.”

Senator Downe expects either party to restore the investigatory function at the CRA, which he says, under Stephen Harper has been degraded, following a reduction in the number of auditors with the skills to uncover complex corporate tax avoidance accounting schemes.

He stresses that it is not illegal to stash one’s taxable earnings in foreign banks, but that it is against Canadian law to fail to disclose income to the CRA.

The senator does not seem fazed by the reality that tax avoidance is invisible as a political issue right now.

“These things take time,” Senator Downe maintains, pointing to how he himself, the NDP tax issues critic Murray Rankin and executive director at Canadians for Tax Fairness, Dennis Howlett are laying the groundwork for public outrage through their own individual public speaking.

“The element of fairness is such that when Canadians hear about this, I know which side they will come down on,” the senator adds.

Howlett says that the CRA tends to focus its energies on small time tax cheats in Canada — such as small businesses, which do not collect the HST — but are less aggressive when it comes to more financially endowed citizens who take their money abroad.

“They do that because those [smaller] cases are fairly straight forward and it doesn’t take a lot of expertise to pursue them,” says Howlett.

Furthermore, none of the 264 wealthy Canadians who took advantage of secret bank accounts offered by the Swiss branch of the large UK bank, HBSC (clients also included celebrities, politicians and drug dealers) were ever charged by Canadian authorities, according to a CBC report.

Instead, under the CRA’s voluntary disclosure program, confessions to an illegal failure to disclose by the participants plus their actual payment of owed taxable earnings sufficed. Through this process CRA recovered about $63 million in unpaid taxes from this scandal.

We don’t have an official estimate of how much Canadian money is going offshore to escape the tax man.

A few years ago Canada’s public budget officer Kevin Page met resistance from CRA when he attempted to garner tax data from the department to measure the tax gap — how much taxable income is not flowing into the federal government’s coffers due to tax avoidance.

Senator Downe is cautious about offering an estimated total of the hidden Canadian billions.

However, Canadians for Tax Fairness in its own analysis based on foreign direct investment data collected by Statistics Canada reports that a whopping $199 billion in Canadian corporate assets is sitting in foreign bank accounts including the Cayman Islands, Bermuda and Barbados.

It is not clear talking to NDP MP Murray Rankin how much revenue his party believes it can garner from beefing up the enforcement and investigatory functions of the CRA and the closing of legal tax loopholes. He says the effort will be worth it nonetheless.

“This lost money could be used to build a better medical system, to tackle environmental degradation and to make Canada a fairer country by reducing the growing inequality among Canadians. “

Nonetheless, the active participation of global chartered accountancy firms in assisting global companies in the funneling of huge sums via banking systems from high tax countries to low tax countries — Luxemburg served as a convenient conduit in this regard for the likes of Amazon, IKEA and the Koch Industries — demonstrates that national governments alone can only do so much, says Francine McKenna, a Chicago-based journalist, blogger and certified public accountant. “You need an international framework because a single country may be just being part of the process [of tax avoidance],” she says.

The British based Tax Justice Network reports that there is as much as $32 trillion of global corporate revenue sitting hidden and untaxed in 80 off shore secret bank destinations around the world.

It is with that challenge in mind perhaps that the, Organisation for Economic Co-operation and Development (OECD) has embarked upon setting up an automatic sharing of detailed corporate information including taxes paid and deferred income by the tax authorities in the member countries — which include Canada, the EU and the U.S.

“Canada has been a laggard,” in terms of its slowness in getting on board with this process, says Howlett who describes the cash-strapped EU countries as the primary movers here. 

At the moment the corporate tax data will be kept secret from the public, which Howlett hopes will change through public pressure.

Both the OECD measure and the CRA’s primary targets involve illegal acts of tax cheating, remarks Alain Deneault, the author of Canada: A New Tax Haven: How the Country that Shaped Caribbean Tax Havens is Becoming One Itself.

The majority of what is described as tax avoidance by the wealthy and corporations is generally legal and will not be affected by such a campaign, he states.

Deneault’s work describes how Canada played a central role in the establishment of tax avoider friendly banking systems in the English-speaking Caribbean countries such as the Cayman Islands.

He says Canada shares many of the characteristics of a tax haven itself in terms of offering a variety of incentives to get the world’s major mining companies to set up shop and trade on the domestic stock exchanges.

”A country is never a tax haven for its own citizens, it is for foreigners,” says Deneault.

McGill’s H. Heward Stikeman chair in tax law, Allison Christians echoes this sentiment, but also suggests that the word “tax haven,” is a misnomer since it sets up a false dichotomy between good countries and bad countries.

She argues that many countries, which are not normally described as havens are doing contentious things like offering low corporate taxes (e.g. Canada) or anonymous incorporation (the U.S.) to attract mobile capital to their jurisdictions.

“I do not believe that it is productive to talk about tax havens as if there is a class of known bad guys who are trying to hurt us so we should direct our attention at them, while everyone is not on that list. This is an issue of legally sanctioned tax avoidance,” she says.


This is an update and a shortening of a longer piece written by Paul Weinberg for the July 2015 of the Monitor.

Paul Weinberg is a Hamilton-based freelance writer who can be reached at [email protected].

Photo: flickr/ thetaxhaven


Paul Weinberg

Paul Weinberg

Paul Weinberg is a freelance writer as well as author and editor, based in Hamilton, ON.