Book sounds klaxon for global taxation reform
Alain Deneault’s book appears at a propitious time, just weeks after the leak of confidential documents relating to tax evasion and the Panamanian law firm Mossack Fonseca. As the world’s eyes again fix on how corporations and the super-rich seek to evade tax through a series of shell companies and moneylaundering scams, Canada — A New Tax Haven explains this country’s central role in the creation and development of tax havens, sounding a klaxon for global reform of banking supervision and taxation policy.
The book also delivers a firm slap to those, including perhaps the current federal government, who would seek to promote Canada as a bastion of feel-good liberalism. Among a long list of eye-popping facts about Canada’s role in global financial huckstering, Deneault asserts that the “flag of convenience” used by bootleggers and money launderers aboard ships for more than a century was a Canadian invention, and that some Canadian financial institutions were so close to brutal Central American dictators in the 1950s that their offices were firebombed by insurgents.
Deneault argues that money laundering and tax evasion have been classified as fiscal issues for too long and that these crimes should instead be viewed as political issues since they affect the capacity of states to raise adequate revenue to fund social programs. As regards Canada specifically, he delves into the history of this country’s relationships with Britain and the United States to suggest that aggressive Canadian banks were able to profit both from their association with these “metropolitan” powers, and also from the fact that they were not the “colonial” nation itself, effectively appealing to both international capital and local independence movements in the Caribbean.
Deneault is a critical theorist by training, and a radical by persuasion. On the one hand, these perspectives give his work a moralizing zeal in the face of epic greed; on the other, they give ammunition to those critics who might seek to dismiss his accusations as the rants of a Marxist. By allowing his rage to cloud his judgment, Deneault risks carving a gargoyle out of his sense of injustice, a caricatured radical’s response to the enormities he explores in this volume.
Deneault’s most persuasive argument is that financial regulation of the “offshore” industry is there to serve the interests of international capital and does not deliver any benefit to wider society.
However, his argument that lowering corporate tax and offering duty deferrals for companies to locate in Canada have reduced this country to a tax haven is less convincing, since it ignores both the wider measures of social justice that apply in Canada compared with Caribbean havens, such as minimum wages, health and safety regulations and Employment Insurance, as well as the positive economic and social effects of increased employment.
By offering both an unflinching perspective on Canada’s role in the growth of tax havens and a series of practical remedies, Deneault has done this country a service; it’s a shame that some intemperate language could see his work dismissed out of hand.