The Trudeau Liberal government is being deliberately ambiguous on the issue of COVID-19 financial aid to corporations that use offshore havens to evade Canadian taxes.
When opposition parties and organizations such as Canadians for Tax Fairness first brought up the issue — pointing out that other countries, such as Denmark, decided from the outset that firms that avoid paying taxes would not receive taxpayers’ money — the Canadian government dissimulated and retreated behind generalities about its good intentions to end tax evasion.
Then, on Tuesday, April 28, the prime minister, speaking during the first-ever electronic session of the House said, in French: “We will continue to assure that those who need help get it, but those who practice tax avoidance or evasion will not receive aid” [italics added].
That sounded clear enough.
However, when Bloc Québécois and New Democratic MPs tried to get details, the Liberals refused to offer any. Instead, they went back into a defensive shell, repeating platitudes about how much the government has invested in investigating the use of tax havens.
Bloc MP Alain Therrien put the question to Revenue Minister Diane Lebouthillier, who pointedly refused to even repeat Justin Trudeau’s pledge, let alone amplify it. Instead, the minister told the House there are now 50 criminal investigations of such tax evasion activities. So far, none have resulted in criminal prosecutions.
Lebouthiller did not, in any way, affirm that any company that resorts to offshore tax avoidance gimmicks would be denied COVID-19 aid money. To the contrary, she pointed out that the COVID-19 money in question is supposed to support employee salaries, not corporate profits.
Tax havens are now legal; why not ban the practice?
The next day, during the once-a-week live and in-person session of the House, NDP Leader Jagmeet Singh observed that, in many cases, the use of tax havens remains perfectly within the law, because the government has not moved to legally ban the practice. Then, he put the question to the prime minister this way:
“Very simply, if a company is cheating the public and not paying its fair share by using legal tax havens, will this government commit today to say: ‘No, we will not give them public money if they are cheating the public and not contributing to our economy and our society?'”
In response, Justin Trudeau talked about the thousands of workers who need the money from the COVID-19 wage subsidy, whether they work for large companies or small, franchises or mom-and-pop operations.
“We know that COVID-19 has caused people across the country in different sectors, in different industries, to lose their paycheques,” he said. “Our focus has been on making sure that people get the help they need to pay for groceries, to pay for their rent regardless of the size of company they work for.”
Singh mentioned the case of Loblaws, which, he said, is evading $400 million in taxes. Trudeau responded:
“I’m sure the honourable member isn’t suggesting that someone who works as a grocery clerk at Loblaws shouldn’t get support from the government because of the behaviour of their head office.”
Speaking during regular Commons proceedings on Wednesday afternoon, April 29, Jagmeet Singh discussed the tax haven issue, and the billions it costs the Canadian government in lost revenue, more fully. He placed it in the context of another NDP demand: that the government institute a universal basic income (UBI).
The NDP argues that a UBI would be preferable to the Liberals’ current patchwork approach — an approach that has the governing party repeatedly going back to the drawing board to fill gaps the opposition parties draw to its attention.
Most recently, the Liberals agreed to an NDP suggestion that they boost proposed emergency financial support to students with children so that it equals what other parents (who do not happen to be students) can receive from a different program, the Canada Emergency Response Benefit (CERB).
Linking the issue of support for those who need it most to corporate abuse of tax havens, Singh said:
“It does not make sense that the government is going to deny a universal income at the same time that there are companies that are stealing, effectively, billions of dollars out of our coffers … It is beyond time that the Liberal government commits to closing these tax loopholes to ensure that we have the revenue that we can invest in Canadians …”
Many major Canadian corporations are tax haven abusers
In 2017, Canadians for Tax Fairness issued a comprehensive report on Canadian corporations’ widespread use of tax havens.
Many major Canadian companies thinly disguise their use of these offshore tax evasion schemes by shifting funds to subsidiary or related companies. The Tax Fairness report points out that the 60 largest companies on the Toronto Stock Exchange (TSE) have over 1,000 such entities in tax haven jurisdictions.
“All of the 10 largest companies on the TSE have multiple subsidiaries and related companies in known tax haven locations,” it adds.
Some companies — such as Valeant Pharmaceuticals and Sunlife Financial — have over 50 such subsidiaries or related companies each. The report states that “many of the largest companies have multiple subsidiaries or related companies in multiple tax haven jurisdictions.”
Bringing it back to the level of the average Canadian, for whom the use of tax havens would be a far-fetched fantasy, Bloc MP Christine Normandin remarked that some of her constituents have complained that they do not qualify for government assistance because they do not regularly file taxes. To receive the CERB, for instance, those who apply must show they filed a tax form for at least $5,000 last year.
The MP said she tells her constituents that to get government benefits one must be willing to contribute via the tax system — a policy, she added, that seemed fair to her. However, she then asked, why doesn’t the same principle that governs individuals apply to corporations? Why can multi-billion-dollar corporations still receive government money while at the same time using elaborate means to evade paying Canadian taxes?
Nobody from the government side had an answer to that question.
Karl Nerenberg has been a journalist and filmmaker for more than 25 years. He is rabble’s politics reporter.
Image: Diane Lebouthillier/Twitter