Entitlements and tax havens

Their audacity is limitless — almost as limitless as the number of registered companies in tax havens.

Last week, the revelations from millions of documents aptly named the “Paradise Papers,” leaked from three offshore law firms reinforced that there is a special set of rules for the rich.

And it seems anybody who can is taking advantage of them, including the Queen of England, former Canadian prime ministers and about 3,000 wealthy Canadians. And just as apparent, they defend their right to such avoidance schemes because the laws, peppered with loopholes, allow them.

The law firms help the super rich dodge or avoid paying taxes in their home countries by setting up registered companies in low-tax or no-tax tax havens such as the Cayman Islands, Barbados and Bermuda.

It is this practice of tax avoidance that no government seems to have the guts to tackle. And there are things governments could do to fix the rules, to make them fairer.

Instead, the Paradise Papers starkly reminds Canadians why tax reform lacks real political will and why there doesn’t seem to be any stomach for it, despite the rhetoric.

Last week’s headlines screamed the very real connections and friendships between those who hold political power and those who avail of offshore tax havens to avoid paying taxes on their wealth.

Government treasuries all over the world are losing billions and billions of dollars every year because of these schemes. Those billions could help eliminate federal and provincial deficits, could be used to invest in infrastructure or social programs, could be used to deliver fairness, and contribute to our civil society.

Indeed, for the governing federal Liberals, the Paradise Papers, with all their juicy revelations, couldn’t have come at a worse time, given their recent failed attempts to restore some fairness to Canada’s tax system.

And we know those with wealth and influence have been bending government’s ear, explaining why they are entitled to their entitlements and to preferential treatment under Canada’s tax laws.

(They have been bending my ear, too, including in a recent email from a prominent St. John’s professional who asked why I persisted on writing about “his business.” The “his business” he was referring to were two columns I had written about tax fairness and the issue of individuals who incorporate so they can pay lower taxes. I replied that tax policy is a matter of public policy and therefore everyone’s business. You can bet those whose names are linked to tax havens feel the same way about their super-sized loopholes. It’s their business.)

Last week, we also learned that Canada’s tax collection agency is part of the problem.

Since 2012, the Canada Revenue Agency has been stonewalling requests from the Parliamentary Budget Office for data allowing the PBO to estimate how much money is lost in taxes each year to offshore tax havens. You’d think the CRA would want to know this too and then do something about it, but apparently not.

Maybe because if you’re rich and avoid taxes, you get a special deal from the CRA. Just ask the wealthy KPMG clients who got secret deals from the tax agency.

In response to the Paradise Papers, which named many with close Liberal ties, the national revenue minister and the prime minister said (again) that they were fully committed to fighting tax avoidance and tax evasion.

How committed? Committed enough to do something to fix the rules?

As pointed out by a number of investigative journalists who have covered this story, tax information exchange agreements (TIEA) enable tax avoidance. Getting rid of these special deals might be a good place to start.

If you’re an average working person who loses your job, messes up on your employment insurance forms and gets overpaid, there is no deal. You pay back the money, and sometimes also a fine or penalty. No secret deal for you.

If you were a Sears’ employee who’s lost most of your pension, there is no deal for you. There is no bailout. Tough luck.

For all the talk of fairness, the unwritten two sets of rules still govern our society: one for the wealthy and well-off and one for the rest.

The rules need to change. You can’t use the word fair every day in the House of Commons and not do something to fix these outrageous double standards.

If you’re an average working person who loses your job, messes up on your employment insurance forms and gets overpaid, there is no deal.