Oxfam Canada response to Canada Revenue Agency’s report on tax evasion and tax avoidance
Oxfam Canada welcomes the Canada Revenue Agency’s close review of the ways in which the Canada Revenue Agency can combat tax evasion and tax avoidance in it’s newly released report: The Canada Revenue Agency, Tax Avoidance and Tax Evasion: Recommended Actions.
Governments the world over are losing trillions of dollars each year that could be spent to fund the services, infrastructure and ‘public goods’ that benefit all of society. Closing the loopholes and prosecuting tax crimes is essential to build trust in the tax system and therefore the relationship between citizens and the state.
We welcome the steps taken by the CRA in the past few years to combat tax evasion and avoidance, including the creation of a new Offshore Compliance Division with a special branch that is focused solely on multinational and large corporations. As the Reseau pour la justice fiscale Quebec stated, tax havens have not only resulted in huge revenue losses, but are also driving the race to the bottom for corporate tax rates resulting in an even greater reduction in revenues. This is true for Canada as well. In only 15 years, Canada’s federal corporate income tax rate almost halved. We urge the government to reverse this trend and increase the corporate income tax rate back to 21%.
While Canada is losing large amounts of revenue to tax havens, developing countries are the hardest hit. While the report highlights Canada’s efforts in implementing the OECD Action Plan on Base Erosion and Profit Shifting (BEPS), it fails to point out that developing countries were not included in the drafting of the measures and do not benefit to the same degree from these measures. As a donor country, it is in Canada’s interest that global tax reforms and measures benefit developing countries. Canada should support a second generation of global tax reforms which includes all countries on an equal footing. The CRA can take a leadership role in transferring expertise to developing countries and support them in combating tax avoidance and evasion.
Your recommendations address a broad range of issues including compliance, enforcement and prosecution, international efforts, and codes of conduct of CRA employees. While some of them could be strengthened, we are pleased to see a comprehensive set of recommendations that will strengthen CRA’s measures and put corporations and tax advisors under greater scrutiny, while improving cooperation with the Justice Department to ensure prosecution. The NDP recommendation to establish an all-party parliamentary committee on tax evasion, tax havens and tax avoidance would provide an additional mechanism to ensure that recommendations are followed through and continue to be scrutinized. Considering the significant impact of these schemes, more oversight is better.
For this government to achieve its vision of inclusive growth, closing tax loopholes is critical. These loopholes have directly contributed to extreme inequality—a key factor undermining the achievements of the past decades to lift millions out of poverty.