It is time to put overseas tax evaders in jail.
Canada is facing the worst financial situation since the end of the Second World War, and thousands of Canadians are continuing to hide their money overseas to avoid paying taxes. In the immortal words of the Parliamentary Budget Officer, “there are hundreds of millions, if not billions, of dollars in taxes that go undeclared, unreported and that escape Canadian tax authorities, probably on an annual basis…”
The Canadian Revenue Agency (CRA) has failed when it comes to collecting any of this money hidden overseas. Notwithstanding the CRA’s highly effective domestic tax collection, they have been an utter disaster on overseas tax evasion. Canadians are allowed to have accounts overseas, but it is illegal not to declare the proceeds of those accounts.
We should change the law so that every account held overseas must be declared to the CRA, and failure to declare will be an automatic criminal offence. When the CRA has access to every overseas account held by a Canadian, they will then be able to continuously monitor for any tax avoidance. The absence of this enforcement mechanism is the missing link in the fight against overseas tax evasion. If the law is changed, the next time we have a tax exposure leak like the Panama or Paradise Papers, identifying thousands of Canadians with accounts, those Canadians will automatically go to jail if they haven’t declared these accounts in advance to the CRA.
Other countries have found that when some of their citizens go to jail for overseas tax evasion, the enthusiasm to hide money overseas drops dramatically for those thinking of doing the same. In Canada, notwithstanding the many thousands who have already been exposed for hiding their money overseas, no one has gone to jail and Canada has failed to collect the money owing.
Why does the federal government continue to allow some Canadians to avoid paying taxes? Year after year, the Government of Canada allows these tax cheats to carry-on while the rest of us pay our share of taxes to keep Canada operating.
Among many glaring examples of inaction by Canada’s revenue agency is the Panama Papers, disclosed over five years ago, listing 670 Canadians who had accounts in Panama. Since then, other countries around the world with citizens identified in the Panama Papers have collected over $1.36 billion in taxes that were owing to them.
Canada hasn’t recovered a nickel. Nothing.
Australia has recovered nearly $138 million; Ecuador, $84 million; Spain, $166 million; and even Iceland, a country of three hundred and forty thousand people, has recovered $25 million.
Unfortunately, the Panama Papers are only one of the most recent examples of Canada’s massive overseas tax evasion problem. In 2008, following a similar leak, 106 Canadians were discovered to have over $100 million deposited in just one bank in Liechtenstein. No one was charged. No one convicted.
In 2010, it was disclosed that one bank in Switzerland held accounts for 1,785 Canadians; each account requiring a minimum deposit of $500,000.
Then we had the Panama Papers in 2016 and the Paradise Papers after that, thousands of accounts involving thousands of Canadians. And again, no charges, no convictions.
The Government of Canada’s weak response to the problem of overseas tax evasion is to throw money at the Canada Revenue Agency (CRA), hoping they will spring to life and do their job. No such luck.
Canada needs every dollar it is owed: money to fight the health and financial burden caused by the pandemic, and to build for the future. We cannot saddle the younger generation with a country of high debt.
The money hidden overseas must come home.
In Canada, there is no risk to hide your money overseas because your chances of being charged or convicted range from slim to none. The “hundreds of millions, if not billions of dollars, in taxes that go undeclared…probably on an annual basis” identified by the PBO will not, by itself, solve our financial problems, but it will go a long way to restore prosperity for Canadians.
The failure to collect taxes owed undermines confidence that everyone is being treated equally. If we are all in this together, then we all pay taxes. Otherwise, there is special treatment for some Canadians with the resources to hide their money.
There is much work to do. Since nothing else has worked, it’s time for solid action rather than empty words from the Government of Canada.
It’s time to change the law.
Percy Downe is a Senator from Charlottetown, P.E.I.