Illegal tax sheltering affects all Canadians
April 18, 2013
Clamping down on tax cheats around the world might be the next round involving international co-operation. The reason is simple; most governments are underfunded and desperately need additional revenue.
Historically governments have worked closely when their national interests are best served. This has happened in a concerted effort to fight the distribution of illegal drugs, organized crime and the financing of terrorist groups.
Bad things happen and the best way to uncover those involved is to follow the money. Governments have combined their efforts and used modern computing power to be proactive at fighting crime and terrorism.
In April the whole focus of illegal tax evasion got an unprecedented infusion of damaging evidence. The International Consortium of Investigative Journalists in Washington, DC received 2.5 million documents from an anonymous source.
It received information about 120,000 offshore bank accounts, 450 of those held by Canadian residents. Get ready to hear about the rich and famous who have discreetly sheltered funds offshore and will live to regret it.
Having money offshore is not illegal. However, Canadian tax rules require that income tax be paid on worldwide income. If money was hidden in a tax haven to avoid paying taxes then there are going to be some that will likely be fined and imprisoned.
One of our cautious words about retirement planning has been that regardless of which political party is in power, there will not be sufficient funds available to finance aging baby boomers’ medical costs. Tax fraud has implications for tax-paying Canadians who observe this and see the many other national priorities that are underfunded.
The Canadians for Tax Fairness lobby group estimated that Canada is losing 7 to 10 billion dollars annually to tax evasion. Professor Cockfield from Queen’s University who has been studying the leaked financial documents now says the use of tax havens is more widespread than originally estimated.
CBC News was chosen to be the only Canadian media outlet to be given the leaked financial information. Their original report included damaging information on a prominent Regina lawyer who is married to a Liberal senator.
Records showed that $1.7 million was invested in a trust in the Cook Islands that are geographically close to Australia. Available Canadian tax records from public court documents indicated that no off-shore trusts were owned. Initial calls by CBC to the lawyer and senator were not returned.
The size of the global problem of holding offshore tax havens to avoid tax is estimated to be between 20 and 30 trillion dollars. Canada has 450 residents who are mentioned in the leaked documents, but the countries preferred by Canadians are not included in the initially leaked information.
Will the flood gates open and more evidence become available? Will the sophisticated financial strategies to hide funds and avoid taxation be uncovered and better prepare Canada and other countries for tracking down tax dodgers in a more intelligent fashion?
The story of tax havens for tax cheaters is going to gain momentum. Those who have lied will be punished and publicly embarrassed.
There will be little sympathy from neither our cash strapped government nor the vast majority of Canadians who are paying their fair share. The world has suffered financially during the last years. There will be no sympathy for the ultra-rich who effectively stole from their country.