A new report from Canadians for Tax Fairness (CTF) has shed some light on the depth of the corporate tax gap here in Canada, ringing in at record $30 billion in unpaid taxes for 2021 alone. As if this figure wasn’t bad enough on its own, profits for the 123 largest Canadian corporations assessed by CTF shot up by 60 per cent over the three years leading up to the pandemic. Meanwhile, the government has been penalizing the poor, going after more than 1 million Canadians to repay their Canada Emergency Response Benefit (CERB) for not having met the $5000 minimum income criterion; effectively punishing them for being too poor to receive aid. CTF have called for the government to increase transparency regarding corporate tax affairs and increase taxes on the rich. Corporate tax avoidance, however, is nothing new, and the government has demonstrated zero interest in seriously investigating the offending businesses.
The status quo of billions unpaid
The $30 billion tax gap—the difference between what those 123 companies actually paid and how much they should have paid according to the tax code—is the current apex of a long-standing trend. In 2014, Canadian companies avoided paying up to $11.4 billion worth of taxes. Between 2014 and 2018, they failed to pay an estimated $23.1 to $36.6 billion. These calculations are based on officially documented revenue, yet Canadian corporations were also stars in the Panama, Paradise, and Pandora Papers, a series of leaks that revealed the massive off-shore accounts held by the ruling class for tax-avoidance purposes, as well as the Bahamas Leaks. A 2018 study from Canada Revenue Agency (CRA) suggested that another $76 to $241 billion in off-shore Bahamas accounts has gone undeclared, and therefore, untaxed. As of August this year, the CRA completed 256 audits investigating the Papers leaks, identifying more than $76 million in taxes owed, but has yet to disclose how much money has been collected.
When asked about the $11 billion worth of taxes avoided in 2014, University of Guelph accounting professor Sonia Dhaliwal said that, though the figure was higher than she expected, it wasn’t cause for concern. She explained that she didn’t see the situation as indicative of a real issue with corporate tax evasion in Canada. Dhaliwal even gave corporate Canada the benefit of the doubt, insisting that all companies “try their best to be compliant,” and blamed the complexity of the Canadian tax system for non-compliance.
The Canadian tax code must truly be a labyrinth, then. To fumble tax reports so significantly that $30 billion are missing, those massive renowned firms like KPMG—hired specifically for the purpose of advising corporations on how to manage their assets and file taxes advantageously—must have been truly, deeply confused by all the rules around taxation. Conservative MP Adam Chambers has contended that the CRA, too, must be confused about the tax code, and perhaps that’s why they struggle to enforce it.
Other MPs have shared Chambers’ sentiments toward the tax code. The NDP’s Niki Ashton commented on the Panama Papers and related leaks, expressing her shock at the CRA’s inaction and lack of urgency. “At a time of economic crisis for many Canadian families,” she said, “what many are seeing is that there’s one set of rules for one set of people, the rich in our country, and one set of rules for everybody else who has to pay their fair share.” She then called on the government to take immediate action, close tax loopholes, and provide greater resources to the CRA to speed up their investigations.
Ashton is right to point out that the rich live according to a different rulebook than the working people, but can we really trust the government to take the sort of action she’s suggesting? Is it enough to try to close loopholes or give more funding to the CRA?
Serving the rich
Despite the threats against tax evaders plastered about the CRA website, the agency has an abysmal track record for followthrough. It has repeatedly gone against its own policies to prioritize the wealthy, as it did in 2019 to make backroom tax deals with a large (unnamed, of course) corporation, waiving their interest payments and penalties. And again in both 2019 and 2022, when the CRA cleared global accounting firm KPMG of any wrongdoing, despite their role in assisting corporate tax avoidance and off-shore banking affairs.
Looking at the CRA’s reaction to the Bahamas leaks in 2016, it has taken the agency six years just to acquire the documentation needed to demand the Royal Bank of Canada reveal the owners of the offshore accounts it has been servicing. And that’s after being given an extra $1 billion in funding specifically for the investigation into the Bahamas. Six-and-a-half years and $1 billion later, the CRA has not made a single conviction related to off-shore tax evasion. The state’s excuse for issues like this one is that corporate audits are “time consuming and complex.” That may very well be the case, but if the government really wanted to go after corporations evading taxes, they might try spending a little less time going after 1 million plus poor CERB recipients.
Something that Chambers rightly noted was that “there’s a lot of money there” in unpaid taxes. And while this was likely not how Chambers intended his statement to be interpreted, we should think about all the public programs that $30 billion could be going towards. As just one example, the Liberals and Conservatives are always going on about how free education is unrealistic. As Trudeau himself said in 2013, “I don’t think free tuition for university is an efficient use of limited taxpayer dollars.” He then added that it should only be free for “desperately” poor students—ironic, considering the CERB clawbacks. As of 2020, the amount in student loans owed to the federal government had reached $22.3 billion. While it may not cover all the costs of making education free, the $30 billion (that we know of) that corporations have stolen would certainly make a decent dent in funding free education. Trudeau clearly has different priorities.
There’s a reason for that, and it’s not just because Trudeau hates the working class. It’s the same reason that, whenever asked for details regarding corporate tax evaders, the CRA spits back the excuse that the law prevents them from revealing any information about individual taxpayers. All of it comes back to the fact that we live under the rule of the capitalists. At the end of the day, whichever party gets elected into parliament, it will face the threat of capital flight should it decide to attack the affairs of big business. Especially in times of economic crisis, companies forced to pay more will choose not to invest. This is why the state and its agencies bow to the rich and will prey on the rest of us at any opportunity.
Popular demands on the left for higher taxes on the rich and greater transparency ignore this reality: you can’t control what you don’t own. So long as we remain within capitalism, corporations will find ways around paying, and the states they fund will help them keep their secrets. The only realistic way out of this situation is a complete break with the capitalist system.