Canada is too far behind on dealing with tax evaders

Our laggard ways enable ‘snow washing’ of wealth

Last week, the U.K. took an unexpected but praiseworthy step in cracking down on some of the world’s most notorious tax havens.

The U.K. already boasted a strong domestic framework for corporate transparency. But it has now passed legislation requiring public registries of beneficial ownership of corporations and trusts to its offshore territories, including the Cayman Islands, Bermuda and the British Virgin Islands.

In the wake of the Panama Papers and Paradise Papers, other countries have also made significant strides in recent years both to strengthen their level of wealth transparency, and to recover revenue previously lost to tax evasion. But unfortunately, Canada has done nothing but fall behind the rest of the world on either count.

On the accountability front, we rank alongside South Korea as the only two G20 countries with what Transparency International considers to operate under a “weak” framework for corporate anonymity.

As a result, Canada has become an enabler of large-scale money laundering — to the point where “snow washing ” has become a familiar term in addressing the issue. And any excuse about jurisdiction rings hollow in light of how easily concerns about the division of powers are dispensed with — whether through federal intervention or provincial negotiation — in order to serve the interests of our corporate class.

What’s worse, we’re also years behind the curve in tracing and recovering revenue lost to the tax evasion which has already been publicly exposed.

Other countries have announced the return of hundreds of millions of lost dollars resulting from investigations into the 2016 Panama Papers revelations.

But the Canada Revenue Agency doesn’t anticipate being able to offer even an estimate as to what might be recouped for another two years.

Meanwhile, as our inclination and ability to ensure that wealthy individuals pay their fair share both remain lacking, new research has offered a clear indication of the stakes involved in properly documenting and fairly taxing wealth.

In a study of Scandinavian countries which traced both official tax data and information leaked from offshore institutions, Annette Alstadsaeter, Niels Johannesen and Gabriel Zucman determined that offshore tax evasion is almost entirely confined within the richest .01 per cent of households. But the privileged few people at that level of wealth managed to secret away enough assets to change their share of an entire country’s wealth by up to 25 per cent — and in the process, avoided paying a quarter or more of the taxes they should have contributed to the public good.

If there’s any question as to whether those findings necessarily apply here, it arises primarily from the prospect that our problem may be significantly worse — both because we have a less equal distribution of wealth to begin with, and because of our policy of deference to those who hold it.

But even if our tax evasion problem only matches that of the countries studied, a few thousand ultra-high-net-worth individuals are avoiding paying their fair share to the tune of billions of dollars beyond the money already known to be sheltered offshore.

Not surprisingly, Alstadsaeter, Johannesen and Zucman conclude their analysis by pointing out the importance of reining in wealth concealment.

And due to our embarrassing starting point, we’d have more to gain than most countries by taking heed.

Unfortunately, the Trudeau government hasn’t shown any inclination to change our standing as a global laggard in corporate transparency and offshore tax recovery. And so the vast majority of Canadians will continue to pay the price — in reduced services and higher taxes — for tax evasion made possible by the secrecy being granted to the wealthiest few.