Tag Archives: tax evasion

Tax Haven or Tax Heaven: Introduction – Were the "Panama Papers" about #offshore "tax evasion" or "tax avoidance"?


The above tweet references an article written by Tony Burman, which appeared in the Toronto Star (and other papers) on April 9, 2016.
The article included:

The global aftershocks of the so-called Panama Papers are only beginning to be felt. More revelations are expected in the weeks ahead, and this will only add to the uproar.
The prime minister of Iceland has already been dumped. Other government leaders have been embarrassed. Several countries have announced inquiries into the secretive world of offshore tax evasion. And public anxiety about the corrupt coddling of the world’s superwealthy “1%” is showing signs of turning into red-hot anger.
But we shouldn’t be surprised. It’s not as if we didn’t already know that the world’s political and business elites frequently cheat and steal, that our governments are swindled out of trillions of dollars of revenue and, as a consequence of this greed, the vast majority of people suffer from a painful culture of austerity so these freeloaders can get richer. We already knew that.
However, it is the disgusting detail contained in this week’s revelation of leaked documents that is so revolting — and, of course, the appalling fact that so much of this is technically “legal.”
With their own interests in mind, politicians and business leaders in many countries have worked quietly in the dead of night to make this so. The result is that, more than ever, taxes now appear to be primarily for the little people.
The documents come from an influential Panama-based law firm. They include 11.5 million internal records disclosing the financial secrets of heads of state, billionaires, drug lords, celebrities and others.

While expressing outrage at the part of the “Panama Papers” that represents tax evasion, Mr. Burman identifies that much of the revelations of the “Panama Papers” was the result of clear and deliberate government policies and laws. In other words, the story of the “Panama Papers” is mostly about “legal tax avoidance” and ” NOT illegal “tax evasion”. Therefore, it is entirely unreasonable and counterproductive to focus on “tax evasion” and exclude “tax avoidance” from the discussion.
Nevertheless, when it comes to tax evasion …


The OECD’s Q and A about the “Panama Papers” reveals:
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Tax Haven or Tax Heaven 7: Senator @PercyDowne, the "tax gap" and the need to "close" it


Senator Percy Downe of Prince Edward Island has long been concerned with offshore tax evasion. You can keep up with his contributions to the discussion by following him on Twitter.
FATCA, Canada’s “Tax Gap” and Closing that “Tax Gap” …
This week’s “Panama’s Disclosures” have generated significant discussion about “taxation”, “fairness” and the “fair administration of taxation”. The “Panama Disclosures” suggest that the business of “keeping money outside one’s country of residence” is alive and well.  The response in the media (well the “Panama Disclosures” were instigated by the media) and various commenters suggest that the “public and political appetite” to “go after” those tax evaders (particularly the “offshore” type) is alive and well.
There are two themes to the public response.
Theme 1 – The need to close the tax gap …
On April 6, 2016 the Globe published an interesting article by Senator Percy Downe of Prince Edward Island. Senator  Downe speaks of the need to “close the tax gap” – that is the difference between what Governments are owed under their tax laws and what they are paid. Senator Downe notes the significant role played by “offshore” tax havens in aggravating the tax gap. He notes:

“The federal budget has earmarked $444.4-million over five years for the Canada Revenue Agency to “enhance its efforts to crack down on tax evasion and combat tax avoidance.” Let us hope that some of this money will go to the fight against overseas tax evasion, a problem that has cost the Canadian economy untold millions of dollars.”

The fight against “offshore” tax evasion has resulted in new world of information exchange (reflected in the OECD “Common Reporting Standard” (CRS) and the U.S. “Foreign Account Tax Compliance Act” (FATCA). Both are designed to facilitate information exchange and make it difficult to keep money “offshore” on an anonymous basis.
That said, both FATCA and the OECD Common Reporting Standard impose huge administrative costs on financial institutions, erode privacy rights and (in the case of U.S. citizens) make it difficult for them to access normal financial products outside their country of residence.  Let’s not kid ourselves. The fight against “offshore” tax evasion (and not all “offshore” accounts are used for improper purposes) has created huge problems for “everyday folk” and “everyday banks”. In other words, although “offshore” tax evasion is one issue, it is NOT the only issue. Senator Downe recognizes that the tax system must (1) be fair but (2) be fairly administered. He notes that:

“Measuring the tax gap is about the right of Canadians to know that their tax system is fair and fairly administered.”

Theme 2 – The “fair administration” of the tax system …
The way the tax system is administered affects ALL Canadians. The efforts to punish the guilty “few” should NOT result in unreasonable costs and burdens to the law abiding “many”.
On April 4, 2016 Barrie McKenna writing in the Globe and Mail, in agreeing that tax evasion resulting in the “tax gap” is a problem noted:

“There are other inherent tradeoffs in any tax crackdown, including potential intrusions on privacy and individual freedoms.  The extent of those trade-offs depends on how targeted the crackdown is. It’s not unlike the fight against global terrorism.  Authorities can impose sweeping security measures on everyone to stop the few, or it can target suspected individuals through better intelligence.  Just look at the U.S. approach to fighting tax evasion. The U.S. Foreign Account Tax Compliance Act, or FATCA, is one of the most sweeping and intrusive regimes ever put in place. The law is based on the idea that if the Internal Revenue Service can locate every dollar Americans (and dual citizens) have stashed away anywhere in the world, they can also tax it.  And they’ve bullied virtually every developed country to help them in the effort, including Canada, where taxes are generally higher than in the United States.  The crackdown has forced thousands of Americans living in Canada to spend small fortunes to come out of the shadows, even though they owe little or no taxes. They include so-called accidental Americans, whose only crime was being born in a U.S. hospital.”

FATCA and tax administration in Canada …
FATCA is a U.S. law that the Government of Canada has legislated into Canadian law. Pursuant to FATCA, the Government of Canada has changed Canadian law to force the Canadian banks to proactively search for and identify Canadian residents (including Canadian citizens) who were born in the United States. Think of it: the most important thing about a person is where they were born. The purpose of FATCA is to assist the U.S. to locate individuals who were born outside the United States and happen to live in other countries. The purpose is to force them into the U.S. tax system. (The United States imposes taxes based on a U.S. place of birth). The effect of this initiative is two-fold:
First, one group of Canadians is being singled out (based on place of birth) and then turned over to the U.S. Internal Revenue Service. The purpose is to force them to comply with U.S. tax laws which WILL for many people result in the payment of taxes to the U.S.  Canada has agreed to allow the U.S. (at its sole discretion) to define who is a “U.S. person” and therefore subject them to these rules of “search and seizure”.
Second, the result of “U.S. Person” Canadians paying taxes to the United States is that “after tax” Canadian capital is being siphoned out of Canada into the United States. This is a consistent U.S. tax on the Canadian economy, which will continue into perpetuity. In other words, Canada has allowed the U.S. to impose a permanent tax on Canada because some Canadian citizen/residents were born in the U.S.
FATCA aggravates the “tax gap” in Canada …
Therefore, I propose a new aspect to the meaning of “closing the tax gap”. This aspect would include a recognition that:
No “offshore country” can be permitted to siphon “after tax” Canadian capital to that country. Canada must end its FATCA agreement with the United States! This is in the interest of  having a tax system that is (1) fair and (2) fairly administered!
Speaking of “offshore country” tax havens …
The consensus is that the United States of America (because it has not signed on to the CRS and provides no meaningful information exchange under FATCA) is now the world’s number one tax haven! “Do as I say, and not what I do!”
John Richardson
Co-Chair and Legal Counsel:
Alliance For The Defence of Canadian Sovereignty