Canada’s Federal And Provincial Governments Should Make Corporations Pay Their Fair Share Of Taxes

News from the public interest group Canadians for Tax Fairness and its executive director Dennis Howlett

As the country rolls towards a 2015 federal election, we’ve been doing our best to make sure that politicians and voters ask the right questions about achieving tax fairness.

Canada’s Harper Government’s Revenue Minister Kerry-Lynne Findlay defeinds corporate tax cuts that outstrip those in the U.S.

We’re hitting a nerve.  Recently Kerry-Lynne Findlay Canada’s National Revenue Minister called us “ politically biased” , “ ill-informed” and a “special interest group”.  This was in a letter she wrote to the Charlottetown Guardian in response to a letter from Senator Percy Downe which in turn sparked several more heated exchanges. The Charlottetown Guardian even published a blog I wrote about this war of words.

For the record, we want to work with any politician who believes in a fair and accountable tax system.  That should be all of them, right? We have asked for a meeting with Ms. Findlay, but so far without sucess.  

Here’s a bit of what we’ve been up to lately:

Taking It To The Premiers

At the end of August  I took our message to Charlottetown where Premiers and territorial leaders held their annual Council of the Federation meeting. 

Most provincial and territorial governments rely on the Canada Revenue Agency to raise their revenue. Under the CRA’s watch, Canadian money in tax havens has ballooned to an all-time high – an estimated $185 billion in 2013. Almost $63 billion of that is in the popular tax haven of Barbados – an island paradise that is one-tenth the size of PEI, where the premiers held their late summer gathering.

In this editorial published in The Charlottetown Guardian, I explain why premiers need to lean on the federal government and the Canada Revenue Agency to stem the flow of Canadian money offshore. Retrieving that money could prevent cuts to provincial services and avoid harmful austerity measures that have negative impacts on everything from transportation and environmental safety to education.

Are premiers ready to admit that tackling tax havens and loopholes might be a better path than slashing services?   We’ve received letters from some provincial leaders acknowledging the issue – and we are hoping to continue that conversation from St. John’s to Victoria in the coming year.

Voters certainly see the connection.  They packed the room at a Town Hall on Tax Havens and Loopholes where I was a featured speaker along with PEI Senator Percy Downe. He has been raising a ruckus about the government’s inaction on secret bank accounts that thousands of Canadians have set up in Switzerland and Liechtenstein. 

Staunching the Flow

Canada has the lowest corporate tax rate in the G7.  Has that created corporate loyalty here?  Has it boosted job creation? In a word – no. It seems this is still not good enough for many Canadian corporations.

It isn’t just Google, Starbucks and Amazon playing tax games. Canadian corporations like Cameco and Gildan use complex, opaque practices to shift profits into low or no-tax jurisdictions. This results in many publicly traded Canadian companies paying an effective tax rate well below the already low corporate tax rate.  

According to data from KPMG, big Canadian corporations lead the international pack when it comes to the difference in paying stated corporate tax rates and effective rates.

So how do you stop Canadian multi-nationals from setting up subsidiaries in offshore tax havens so that they can avoid paying Canadian taxes?  NDP  Revenue Critic Murray Rankin has proposed legislation (Bill C-621) that would make it easier for government and the courts to crack down on those who are playing the system. The changes focus on “economic substance”. Corporations must be able to prove a transaction has economic purpose aside from reducing the amount of tax owed. Setting up a storefront office in Cayman Islands or Switzerland and then sending large invoices back to the Canadian head office charging “management” or “licensing fees” would no longer be acceptable.

It is one step towards fixing a broken system.  You can  encourage your MP to support this bill here . 

Learn more about Canadians for Fair Taxation by clicking on http://www.taxfairness.ca/ .

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