Know the Facts
CANADIAN TAX HAVENS INVESTMENTS AT ALL-TIME HIGH!
- 24% of Canadian direct investment overseas in 2011 went to the top twelve tax havens, up from 10% in 1987. Tax havens of the Barbados, Cayman Islands, Ireland, Luxembourg and Bermuda were five of the top eight national destinations of total Canadian investment abroad. Canadian investments in these tax havens totaled $130 billion in 2011.
- Barbados - $53.3 billion
- Cayman Islands - $25.8 billion
- Ireland - $23.5 billion
- Luxembourg - $13.8 billion
- Bermuda - $13.2 billion
- Barbados is the tax haven of choice for Canadian financiers. In 2011, $53.3 billion of untaxed Canadian dollars were parked there. Four years earlier that figure was $33.4 billion. That is a growth of nearly 60 per cent.
- Tax havens are the ultimate hide-out for dead money. The banking and financial services sector now accounts for 51% of Canada’s total direct investment offshore, more than double its share from 1987. For instance, the Royal Bank of Canada has 30 subsidiaries in confirmed tax havens. Other financial institutions aren’t far behind. This means that a growing share of this money isn’t used for actual economic activity – as when a small business invests in innovation or employees. Instead it is parked there to avoid tax.
WHAT OTHER COUNTRIES ARE DOING:
- The Australian Tax Office and the United States Internal Revenue Service have invested in special units to handle offshore tax avoidance.
- The British Government created the High Net Worth Unit which tracks artificial losses used to reduce an individual’s tax liability.
- The British Government is also working on anti-avoidance legislation.
- The cash-strapped Greek government is finalizing a treaty with Switzerland that will improve access to information about banks accounts being used for tax evasion purposes.
WHAT CANADA ISN'T DOING:
- A report by the Tax Justice Network in 2011 estimated Canada loses $80 billion a year to all forms of tax evasion. The government does not have a system for estimating and publishing the amount of lost revenues due to offshore non-compliance.
- In 2011, there were more than 9,000 CRA employees working on taxpayer compliance. As of May 2012, 510 were assigned to the international audit program. That number hasn’t changed since 2008 even though the use of offshore accounts has skyrocketed.
- In 2012, the Canada Revenue Agency modestly assessed $4 billion in taxes owed on money hidden offshore. But the CRA’s 2010 audit of its own enforcement branch confirms the Agency’s inability to pursue complex offshore cases worth millions of dollars. Instead it prefers to chase down “low-hanging fruit such as small business, and the self-employed.
- The Canadian tax system relies on the principle of voluntary compliance. Most Canadians pay their due. Government leaders acknowledge that ignoring abusive tax strategies undermines community confidence as well as creating opportunity for criminals and terrorists. Canada has an opportunity to work with international partners to strengthen the role of the UN, support a system of country by country reporting, and support an automatic tax information exchange system.