Tax havens and loopholes hurt us all

Tax havens and loopholes hurt us allToronto – November 25, 2017 – The Trudeau government’s claim of working for the middle class has taken a hit over the last few weeks due to the release of the Paradise Papers – a leak of over 13 million files from two offshore service providers and 19 tax havens’ company registries. The data leak and the refusal by the government to close the stock option loophole, as well as pension issues caused by the bankruptcy of Sears Canada, have revealed that wealthy Canadians and corporations still have major advantages over average working Canadians.  

It is estimated that Canada loses up to $15 billion annually due to tax dodging through tax havens. Back in the 1980s, both the Liberal and Conservative parties backed a piece of legislation that essentially opened the door to offshore tax havens. The legislation ratified taxation treaties between Canada and countries with relaxed tax laws, such as Barbados. The NDP spoke out against this bill, warning that such treaties would drastically cut the tax rates for Canadian companies operating abroad. Since that time, additional tax treaties were signed. One solution to the issue of tax havens can be found in a private member’s bill, introduced by NDP MP Murray Rankin, that would impose an economic substance test on money flowing to tax havens and recover over $400 million in tax revenues annually.

During the 2015 election campaign, the Liberal party promised to cut taxes for the middle class and put a limit on the stock option loopholes that enable highly-paid corporate executives to avoid paying taxes on a large portion of the money that they earn. Unfortunately, they have yet to act on this close-the-loophole promise, and while they have made tax cuts, over 80 percent of the benefit goes to those making more than $190,000 a year.

Meanwhile, the recent bankruptcy of Sears Canada reveals how the rich and corporations continue to get paid while workers lose out. Sears workers now face the prospect of losing their health benefits and a significant portion of their pension while highly paid executives receive bonuses to wind down the company’s operation. This is allowed to happen because under current bankruptcy protection rules, workers are not considered a secured creditor, and are therefore at the bottom of the list when it comes to getting what is owed to them.

Canada desperately needs comprehensive tax reform, as Canadians continue to lose faith in a tax system that allows corporations and the wealthy to avoid paying anything near their fair share. Tax evasion and avoidance undermines our democracy and concentrates economic resources in the hands of a few, while starving public services and social programs and fostering increased wealth inequality.

If the Liberal government was sincere in their rhetoric of helping the middle class, they would close the stock option loophole, crack down on tax havens, and change bankruptcy laws to protect workers.