Column -- From the Hill: Wealth inequality and tax loopholes
This morning I read that the CEO of Air Canada had just cashed in his stock options for $52.7 million—and this is on top of his regular salary of $10.5 million and a guaranteed company pension of $750,000 per year. Now, that pay rate is ridiculous enough, but do you know that he will only pay half the regular income tax on his stock option windfall?
This is just one unfair tax measure that, over the years, has allowed income inequality in Canada to grow to shocking proportions. A recent study showed that the hundred wealthiest families in Canada had more wealth than three provinces put together.
I remember speaking to the vice-president of Scotia Bank a few years ago, and when asked what kept him up at night, he said “income inequality.” He went on to say that income inequality isn’t just unfair, it’s a drag on our economy as most Canadians struggle to get by while the top one percent get richer faster.
The stock option issue is by no means the most serious example of tax unfairness in our country. In June, the Parliamentary Budget Office reported that every year a trillion dollars moves from Canadian corporations to offshore tax havens through legal tax avoidance schemes. That costs the rest of us about $25 billion dollars per year in foregone income tax. And this is all perfectly legal! If we add in the losses due to illegal tax evasion, the Canada Revenue Agency estimates the amount could double to over $50 billion. Just think what we could do with $50 billion per year—a fully-funded health care system, universal pharmacare, building affordable housing, proper pensions for seniors and veterans, and billions left over to pay down the debt.
One of the most egregious examples of legal tax avoidance involves a Vancouver mining company that has a very profitable mine in Mongolia. Over five years they made enough income from that mine to owe Canada about $600 million in taxes and Mongolia about $200 million. Instead they opened a post office box in Luxembourg and paid that country $80 million. Mongolia has taken the company to court, but the CRA admits that they gave the company a letter ahead of time assuring them that it was perfectly legal in Canada.
It’s time that Canadians had a government that stood up for ordinary people and closed these loopholes. However, instead of going after the big fish, successive Liberal and Conservative governments have lowered taxes for big corporations and squeezed more money out of the little fish—ordinary Canadians and small businesses.
Yes, it might be complicated to close down offshore tax havens. The wealthy can afford legal advice that often creates a game of whack-a-mole when it comes to tax avoidance. But Canada continues to sign tax agreements with countries around the world, agreements that make these schemes easy to hatch. We could simply attach a condition to these agreements saying that Canadian companies can move profits to other countries if they wish, but if it’s only done to avoid taxation they will be made to pay tax in Canada to make up the difference between the tax rates of the two countries.
Most Canadians are happy to pay their taxes if they feel that doing so is helping to build a better country, an investment in our shared infrastructure and support programs. But when they see individuals and corporations with wealth a thousand times more than they have get away with paying little or no taxes, it naturally breeds discontent, or at least raises the question: “What could Canada do with $50 billion more each year?”