Earlier last year, the Professional Institute of the Public Service of Canada (PIPSC) conducted a survey of Canada Revenue Agency (CRA) professionals. The PIPSC found that out of 1,741 workers surveyed, 90% agreed with the statement that, “It is easier for corporations and wealthy individuals to evade and/or avoid tax responsibilities than it is for average Canadians.” Eight out of ten agreed that, “Tax credits, tax exemptions, and tax loopholes disproportionately benefit corporations and wealthy Canadians compared to average Canadians.” Interestingly, 45% of the respondents felt like, “The ability of the CRA to carry out its mandate has been compromised by political interference.” These results echoed a 2015 report by Canadians for Tax Fairness which outlined the, “systematic issues [that] plague Canada’s tax system.” These results should come as no surprise given the disgusting track record of tax evasion and offshore banking of Canadian capitalists.
The Consortium of Investigative Journalists (ICIJ) released the Panama Papers in 2016, exposing around 625 Canadians involved in tax evasion through offshore accounts. The Paradise Papers, a follow-up report in 2017, revealed that more than 3,300 Canadian companies and individuals actually are guilty of these practices. Further, in June of this year, the Canada Revenue Agency (CRA) estimated that rich Canadians are already evading $3 billion in tax revenue every year. Clearly, tax evasion is not news. But what the PIPSC report highlights is the fact that these individuals belong to a particular class with economic interests inherently opposed to those of the majority of tax paying workers.
According to the report, cuts to the CRA by the Harper government in 2012 resulted in a system that focuses on targeting average Canadians and small businesses instead of rich Canadians and big corporations. This is because outmoded technology and computer algorithms were used to replace 638 CRA workers. While the cuts diminished the ability of the CRA to pursue large tax avoiders, this is only one way in which the system favours the rich.
There is also the fact that big companies and their owners have incredible economic power and political sway. The rich can afford the best offshore law firms and can lobby politicians to ensure the tax system remains a tool for the rich to get richer. For example, the federal government lowered Canada’s capital gains tax rate in 2001. This means that that currently only 50% of the profit of Canadian capitalists is taxed, the rest is tax-free. So while we tighten our belts when the economy hits a slump, wealthy Canadians sleep tight knowing that their profits are either tucked away in offshore accounts or simply tax free.
Not all tax evasion is the result of a rigged system, some of these activities take place with full knowledge and consent of the government. For example, the privately owned Canadian Malartic mine has never paid taxes to either the federal or the provincial government. The gold mine started its activity in 2011 and since 2012 it has received almost $200 million in “tax assistance”. Since the beginning of the operations, 2.5 million ounces of gold with an estimated gross value of USD 3.25 billion have been mined. Canadian Malartic makes billions of untaxed dollars and corporate welfare while workers on minimum wage are taxed every last cent.
A common belief on the left is that simply by increasing taxes on the rich we can mitigate the worst problems of capitalism and combat poverty and inequality, making this system more equitable. This recent information on rampant tax evasion demonstrates otherwise. In a system where capitalists can hide away their money and find all sorts of loopholes, it doesn’t matter how much they are “supposed” to pay. No matter how much capitalists are taxed, they will always find a way to keep their profits as high as possible. In times of crisis, this is inevitably at the expense of tax paying workers.
Marxists are in favor of taking money from the rich in order to fund reforms that benefit the working class. However under capitalism, all reforms depend on the system’s ability to afford them. When the economy is booming, the capitalists can afford to throw a few crumbs down from their table. But when the system is in crisis, as it is now, reforms are clawed back and we are asked to tighten our belts. Capitalists don’t simply avoid taxes because they are bad people, but due to an economic necessity. The intense pressure of competition on the global market is forcing the capitalists to find any way possible to lower their costs, including avoiding taxes. This is the logic of capitalism. The only way to make permanent improvements to our lives is to take control of the wealth that is produced in society, and to put it in the hands of those who produce that wealth – the workers.