2024-11-20 05:00:00
Canada is among the top five countries responsible for cross-border tax abuse, according to experts.
Canada climbed the dishonor table in the most recent State of play on the extent of tax avoidance by multinationals and wealthy individuals drawn up by the specialized NGO Tax Justice Network (TJN) and unveiled on Tuesday. He arrives at 5e rank among the main countries responsible for the problem, being linked to more than 6% of the approximately US$492 billion in tax losses incurred by all countries in one year.
Indeed, if it appears that Canada can complain about losing each year a total of 10.9 billion (more than 15 billion CA$) in tax revenue because of the acrobatics and accounting shenanigans of rich individuals (nearly 2 billion US$, or CA$2.8 billion), but especially multinationals (US$8.9 billion, or CA$12.4 billion), the governments of other countries can especially blame it for costing them more than 31 billion in lost tax revenue, both on the side of large fortunes (nearly 3 billion) and on the side of multinationals (28.2 billion).
At the top of this sad ranking, the British territory of the Cayman Islands, in the West Indies, and Hong Kong are doing much worse, each with just over 45 billion in total tax losses inflicted on other countries. Next come Ireland (almost 41 billion) and the United States (37.5 billion).
However, Canada comes ahead of all other countries, particularly those that are often accused of serving as tax havens, such as the United Kingdom (7e with 23.5 billion), Switzerland (9e with 21 billion), Luxembourg (10e with 17 billion), Panama (17e with 11 billion) and Bermuda (19e with 8.5 billion).
Canada’s fifth place in this TJN portrait of countries complicit in tax evasion and avoidance in the world is a novelty. Last year, the NGO’s experts still attributed it “only” to the 12e rank, with a total almost three times lower (11.5 billion) in tax losses that can be attributed to it.
Dramatic twist
This twist should not be seen as a sign of a lack of seriousness in the TJN methodology, assures Edgar Lopez-Asselin, coordinator of the Quebec collective Échec aux paradis fiscals. “The Tax Justice Network is truly the authority on this subject. I believe that these changes rather reflect the great difficulty of access to information. »
For its evaluations, the TJN is based in particular on data collected under a new rule from the Organization for Economic Co-operation and Development (OECD) requiring large multinationals to report, country by country, their revenues, their number of workers, their profits and their taxes paid.
The central role played by Canada in international tax avoidance is mainly due to three factors, explains Edgar Lopez-Asselin, starting with its generous and accommodating tax rules in the mining sector and for other extractive industries. Tax experts have also learned to take advantage of its numerous bilateral tax conventions signed with tax havens, supposed to avoid double taxation of companies and individuals, but sometimes resulting in double non-taxation. And then, there is “this extreme opacity” which surrounds the financial data of private companies which are not listed on the stock exchange and which too often allows the latter to organize their figures as they see fit.
What is striking, says the TJN in its report, is that all these efforts made for years by the OECD to bring abusive tax practices into line, as well as its new rules, do not seem, for the moment, to have no effect on the problem. The governments that allowed themselves to be convinced to reduce their tax rates to encourage a return to the fold of companies and big fortunes are no further ahead. “The data now shows that this only compounded the losses they suffered. »
Tax avoidance and austerity
The irony, continues the TJN, is that the main countries responsible for the problem, from developed economies, are also the most affected. The authors of the report particularly want as proof these “eight harmful countries” which are opposed to this project in development at the United Nations of a framework convention on international tax cooperation. Made up of the United States, the United Kingdom, Japan, Canada, Australia, South Korea, New Zealand and Israel, this group of “blocking countries” is complicit in almost the half (43%) of tax avoidance in the world, but itself loses 177 billion.
Expected to begin next year, the negotiations at the UN would have the advantage of leading to international rules decided on a global basis, rather than in the restricted circle of the OECD club of rich countries. “Cross-border tax abuse is the biggest obstacle to taxes [et à des politiques sociales] effective and progressive,” argues the TJN.
The US$10.9 billion in tax revenue lost in Canada is equivalent to 6% of its annual health spending. “At a time when we are hearing more and more about austerity in Quebec and Ottawa, this is the kind of thing that risks going down more and more badly in public opinion,” notes Edgar Lopez- Asselin.
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**Interview with Edgar Lopez-Asselin: Tackling Canada’s Cross-Border Tax Abuse**
*Editor:* Today, we have Edgar Lopez-Asselin, coordinator of the Quebec collective Échec aux paradis fiscals, joining us to discuss a troubling new report from the Tax Justice Network. Canada has recently been ranked among the top five countries responsible for cross-border tax abuse. Edgar, can you explain what led to this significant rise in Canada’s ranking?
*Edgar Lopez-Asselin:* Absolutely. The Tax Justice Network’s assessment highlights a number of concerning practices in Canada. It’s primarily due to three factors: our generous tax incentives for the mining sector and extractive industries, extensive tax treaties with jurisdictions known for low or no taxes, and a concerning lack of transparency regarding the financial practices of private companies. These elements collectively enable both wealthy individuals and corporations to minimize their tax obligations dramatically.
*Editor:* Last year, Canada was ranked 12th. What does this dramatic shift tell us about the state of tax practices here?
*Edgar Lopez-Asselin:* The leap to fifth place indicates a worsening situation. It reflects not just flaws in our tax system but a growing complexity around tax avoidance techniques that sophisticated actors are exploiting. The Tax Justice Network’s methodology, which relies on new OECD rules for country-by-country reporting, has brought more information to light, revealing just how significant the losses have become—over CA$15 billion annually for Canada alone.
*Editor:* The report indicates that Canada’s tax practices also have a global impact, with significant revenue losses inflicted on other nations. Can you elaborate on this?
*Edgar Lopez-Asselin:* Yes, it’s striking. While Canada loses CA$10.9 billion annually, it’s also responsible for over CA$31 billion in lost tax revenue for other countries. This dual impact underscores Canada’s role as a key player in global tax avoidance. It’s ironic that countries often branded as tax havens are not as damaging as Canada in this context.
*Editor:* What challenges do you see in combating this issue moving forward?
*Edgar Lopez-Asselin:* One major challenge is the opacity surrounding financial data from private companies. Unlike public companies, these private entities often operate without the scrutiny necessary to ensure compliance with fair tax practices. Moreover, the OECD’s efforts to curb these abusive practices have yet to yield noticeable results, and many countries, including Canada, continue to resist internationally coordinated tax reform initiatives.
*Editor:* So, what steps do you believe need to be taken to address these issues effectively?
*Edgar Lopez-Asselin:* There needs to be a concerted push for greater transparency and accountability in tax reporting. Canada should actively participate in international discussions aimed at creating a binding framework for tax cooperation. Additionally, reforms to tighten tax rules, especially for multinational corporations and extractive industries, are essential to curb these harmful practices.
*Editor:* Thank you, Edgar, for shedding light on such an important issue affecting not just Canada but the entire global community.
*Edgar Lopez-Asselin:* Thank you for having me. It’s crucial we continue this conversation and push for meaningful change in our tax system.
