An irresistible march toward fiscal justice

November 1, 2019

Échec aux paradis fiscaux was founded in 2011 by a small group of unions and civil society organizations fed up with how easily corporations and high-wealth individuals avoid paying taxes. Slowly, the coalition has grown to the point that today, nearly all Québec’s unions are members, alongside a great number of other groups and two national student associations. In the past three years, we have met with executives at the Canada Revenue Agency, organized demonstrations, took part in parliamentary consultations (provincial and federal), and held public conferences and civil education workshops in Québec.

I believe the strength of our campaign for greater fiscal justice comes from Québec’s rich history of social struggle and popular support for public services. While it is true that those very services are currently undermined by austerity policies and privatization initiatives, the people of Québec understand that other political choices would be possible if the funds lost to money laundering and tax havens were brought back within the reach of fiscal authorities.

In that regard, it infuriates Quebecers that we still have a two-tier tax system, where the rich and the most powerful megacorporations are legally allowed to avoid taxes without fear of recrimination. Québec is almost unanimously in favour of requiring that Netflix charge and remit sales taxes, for example, while the federal government claims that legal tax avoidance by internet-based service providers is best for the middle-class. Nonsense! Other tax scandals such as the Panama and Paradise Papers leaks gathered enormous attention here.

When Échec members meet with the public, we find they are genuinely interested and surprisingly well informed on the matter of tax havens. This popular concern has translated into government action. For example, while Ottawa has done nothing to stanch the flow of taxes out of the country (and even worsened the situation), Québec launched an extensive inquiry into how tax havens impair public finances that produced a government action plan in 2017. Although seriously imperfect, the plan dares to acknowledge the existence of tax havens and puts forward some interesting policy ideas.

As I am writing these words, Québec is planning another consultation on the implementation of a public beneficial ownership registry. The policy would reveal who benefits from legal entities such as companies and trusts, make those people accountable if they try to snow-wash money or avoid their taxes, and would considerably bolster corporate transparency. Along with British Columbia's public registry on properties, the Québec action confirms how political mobilization and public interest shape and influence policy-making.

In the lead-up to the October election, all the main parties put forward policy ideas to tackle tax avoidance, yet similar promises in the past have been forgotten by incoming governments. Still, the population has never been more aware of this issue and rightly demands more from their leaders. In order to put the fight against tax avoidance at the forefront of the election, the Échec coalition asked each party to commit to 12 radical and innovative solutions to the problems of tax havens and money laundering. Where they said we were asking too much, we pointed out that many of these measures are already in place or being considered in other countries.

For instance, the government should restrict access to the CRA’s pardon program—which lets some tax avoiders who come forward voluntarily avoid paying much of the back tax they owe—and put the agency under better scrutiny. We also need new tools to tackle tax avoidance via diverted profit logging (of the sort practised by Google) and to increase corporate transparency. A public ultimate ownership registry would help in this regard, as would ending legalized tax avoidance through Canada’s fiscal conventions such as tax information exchange agreements (TIEAs), which let Canadian companies repatriate profits logged in known tax havens without paying taxes.

Finally, Canada must be at the forefront of the fight for fiscal justice by proactively promoting new models of international financial governance. We advocate the idea of unitary international corporate taxation. Rather than considering each company of a multinational firm as an autonomous entity, which facilitates tax restructuring and avoidance, multinational companies should be taxed based on their consolidated revenues, and on profits realized in each country.

The world urgently needs to transition to a cleaner and more equitable economy. With all the new public investment this transition entails, reforms that put an end to tax avoidance and tax havens have never been more important. Pressure is growing for our politicians to do more, and more importantly to do better. Other countries are showing the way by trying different, innovative approaches to end tax havens. I believe Canada should be one of them.

Samuel Lesage is spokesperson for Échec aux paradis fiscaux. He thanks Benjamin Gingras for his help with this article, and Alain Denault for his extensive work, with the Réseau pour la justice fiscale, on tax avoidance and the links between Canadian diplomacy and Caribbean-based tax havens.