Tax Shelters For The Rich

The financial columns of various news outlets are all abuzz this week at the release of thousands and thousands of files containing information from a Panama-based law firm. Those files indicate that numerous  fraudulent shell corporations were set up to provide tax shelters for people with lots of money. I think I am always a little bit disappointed in myself when I realize that I am still surprised every time I hear such stories. It is not that I am surprised that people hide money - lots of Canadians bend the rules to avoid paying tax.   I am not even shocked at the amount of money that has been hidden away. What  astonishes me is not that just that rich people lie about it,  but that they act as if not paying income tax is no big deal.

In the past three or four years I have written a number of times about the fact that Canadians from all walks of life complain about the lack of services, complain about amount of taxes they pay and then do everything they can to avoid paying their share of income tax. It continues to frustrate me almost above anything else that people do not  seem to be able to make a connection between everyone paying  their fair share and there being enough money to provide  an adequate level of services. When I rant about this to my peers, the most common response is that the real problem is that big corporations and the very rich do not pay their fair share. And my peers are at least partially right.

On a regular basis there are news stories of another tax fraud scheme being found.  Rich Canadians are not unique in wanting to hide their money from the national taxman; every country has the same problem.  What is perhaps remarkable is that the Canadian government seems to be unwilling to do anything to correct the problem. If you are really rich it would appear the chances of being charged are rather minimal. If the cases that were reported in the Financial Post or are posted online on CRA's website are any example - the people who are pursued are the relative small fish, not those who are, and having been hiding millions of dollars for years. My suspicions as to the biasness of CRA is confirmed in a MacLean's article from 2014. The article in part says that Canadian government does not, unlike some other western countries, invest in enough resources to find the major violators.

As well the minimal consequences that may be imposed if caught are well worth the gamble. For example, of the 128 people that were convicted of tax evasion in Canada in 2013, only 29 went to jail - for an average of 22 months (CBC) (they also were fined and had to pay back money owed). People who voluntarily admit to tax evasion just have to pay the money they owe plus interest. That sounds like a pretty good deal to me considering that CRA only pursues a small percentage of violators. It is even a better deal when government's investigators appear to allow the companies who set up some of the fraudulent tax avoidance schemes to negotiate good deals for their clients (CBC). I am not convinced that CFS's policy of shaming the convicted by posting their names is a particularly  effective method of punishment. I suspect that it only perpetuates the guilty's mythology of having done nothing wrong and of having been unfairly treated by the Canadian government. 

There is no debate among those of us who pay taxes that everyone else should pay as well. For those  who don't pay income tax because their incomes are too low or don't because their incomes are so high that they can hire people to help them avoid paying, the responses seem to be less clear. At one end of the spectrum it is argued that the lack of services etc. is someone elses fault - that those who are rich, should pay more. At the other end, the argument appears to be that they already pay enough and that it is not their responsibility to take care of everyone. Both responses seem wrong or at least incomplete to me.

We all need to give what we can so that everyone can get what they need. Those who chose not to - should get punished so that they and others who aspire to be like them learn there are responsibilities that cannot be avoided.