C4TF Annual Report 2018-2019

LETTER FROM EXECUTIVE DIRECTOR TOBY SANGER

I started as executive director of Canadians for Tax Fairness in the fall of 2018. It’s been a busy and exciting time—and the coming year promises to be a pivotal year for tax fairness, with the federal election and the potential for significant international tax reform. In its first seven years, Canadians for Tax Fairness (C4TF) has very successfully put issues of tax fairness on the political agenda. This is thanks to the leadership of former executive director Dennis Howlett and our other talented and hardworking staff, the commitment of our board, collaboration with allies, and the activism of our thousands of supporters. And of course, none of it would be possible without the generous support of funders, big and small. 

In advocating for fairer taxes from the wealthy and corporations, we’re up against those with much deeper pockets and wealthier backers, such as the Canadian Taxpayers Federation, which has an annual budget more than 20 times ours. Yet despite our small size, we’ve had an outsized influence. In a classified memo, the federal finance department listed Canadians for Tax Fairness at the top of their list of influential stakeholders on tax fairness issues.  But we’ve got big challenges ahead. Alberta Premier Jason Kenney is planning to cut Alberta’s general corporate tax rate by a third, to 8%, which will cost the province over $1.5 billion a year in revenues. Doug Ford is also planning to cut corporate tax rates in Ontario. Both these Premiers are cutting hundreds of millions from important public services to finance tax cuts for large profitable corporations. We’ve made strong arguments why this is a bad idea, and why corporate tax cuts won’t trickle down, but we need to fight back and amplify these points. 

The federal election this year is a once-every-four-year chance to establish another mandate for the federal government. Taxation will be a major issue in the election campaign, with clear differences between political parties already apparent. We’re prepared with a tax fairness platform that shows how the federal government could generate many billions more annually by making the tax system fairer and simpler—but we’re going to need help to get these messages out.

We’ll also continue to be very active at the international level because these rules have a big impact on what individual nations including Canada can do. We have an extraordinary opportunity over the next year to reform the international corporate tax system, which was recently described by the head of the International Monetary Fund (IMF) as “fundamentally out of date”. 

The far-reaching reform proposals we’ve advocated with our tax justice allies are now being very seriously considered by the IMF, the Organization for Economic Development (OECD) and major nations. At stake is the estimated US$650 billion in annual revenues that nations lose from large corporations shifting their profits to tax havens and low tax jurisdictions. 

There will be a fight back, but we’ve never been this close to comprehensive international tax reform and we’re going to need to push hard to achieve it.

Thank you very much for your support.

Toby Sanger, Executive Director

CAMPAIGN: CLOSE TAX LOOPHOLES

Our tax system is riddled with expensive and unfair loopholes that primarily benefit the affluent. Analysis by the Canadian Centre for Policy Alternatives has shown that not only do these loopholes mostly reward high incomes, but their benefits also primarily go to men rather than women.

Thanks to ongoing campaigning and lobbying efforts, we have made progress in recent years to eliminate and limit some of the most regressive loopholes.

Every federal budget since 2016 has included some measures to close tax loopholes. The current government started out strong, cancelling family income splitting, and planning to restrict the use of private corporations for tax avoidance. We launched a campaign in support and achieved some positive changes, but they were watered down in the face of a coordinated and well-financed campaign by business lobby groups opposing them.

In its 2019 budget, the Liberal government finally outlined plans to limit the stock option deduction, top of our list as the most regressive tax loophole. We welcome this commitment, but are concerned they will only partially close the loophole. There’s no reason those who benefit from stock options should pay lower taxes than the rest of us do on our working income.  We were also encouraged to see the federal NDP recently commit to limit the larger capital gains restoring the inclusion rate to 75% from the current rate of 50%.

Policy-makers are clearly responding to our campaign and public pressure, but there is much more to be done. As we outlined in our pre-budget submission and again before the federal budget, closing just a few of these unfair and ineffective tax loopholes while making the tax system simpler could generate over $20 billion in additional revenue annually for the federal government and many billions more for provincial governments, without raising taxes for the vast majority of Canadians.

This would be enough in this coming year to eliminate the federal deficit and provide funding for additional programs.  We need to keep the pressure on both federal and provincial governments to close these unfair loopholes and will make this a major priority in our federal election platform, advocacy and campaigns.

CAMPAIGN: TACKLE TAX HAVENS

Canadians for Tax Fairness has led the Canadian movement to tackle tax havens, along with our Quebec partner Échecs aux Paradis Fiscaux. This issue achieved front page coverage as the Panama Papers, Paradise Papers and other leaks have revealed the extent to which tax havens are used and abused by the wealthy, corporations and criminals to hide their assets and to avoid and evade taxes.

The wealthy and corporations hold at least 9 percent of Canada’s total financial wealth offshore, resulting in at least an annual $8 billion loss in government revenues. The situation is even worse for developing countries, with an estimated 30% of Africa’s financial wealth held offshore and their governments losing more to tax havens and illicit financial flows than they receive in international development assistance.

We first raised the issue of the Canada Revenue Agency (CRA) cutting back its offshore audit and enforcement capacity in our 2015 report What’s Wrong with the CRA and How to Fix It.  Our 2017 report Bay Street and Tax Havens revealed the rampant use of tax havens by corporate Canada: 56 of top 60 companies listed on the Toronto Stock Exchange have over 1,000 subsidiaries in known tax havens.

A poll we commissioned found that 87% of Canadians agreed that the government should change laws to make corporate use of tax havens illegal. A survey by the Professional Institute of the Public Service of Canada found over two-thirds of CRA professionals—those who are charged with enforcing our tax laws—believe that Canadian rules related to setting up offshore corporations or tax accounts are too lenient and should be reformed. This past year, the Auditor General of Canada confirmed these findings in its report on the CRA, which found that the agency has been more lenient with corporate and offshore cases than when pursuing ordinary Canadians for taxes owed.

We are achieving progress. As a result of pressure from tax justice groups worldwide, OECD countries including Canada are implementing reforms including automatic exchange of tax information and country by country reporting by multinationals. Each recent federal budget has included some measures to crack down on tax evasion and combat tax avoidance. We’ve succeeded in having the federal government restore capacity to the CRA to investigate and enforce international tax evasion. We also got the agency to publish estimates of how much money it is losing through domestic and international tax evasion, through its Tax Gap reports. But much more needs to be done and this coming year will be crucial.

There is now an opportunity for real substantial progress through the G20 and the OECD over the coming year, and we’ll strongly advocate for these changes with our international tax justice allies.

CAMPAIGN: END SNOW-WASHING

Canada has unfortunately become a destination for international money laundering, the Canadian variant that is now internationally known as “snow-washing”. We’ve become a major centre for money laundering because we have the weakest corporate transparency rules among all G20 countries, according to Transparency International.

Our lax laws allow the real owners of companies, real estate and trusts to remain secret. This allows criminals, tax evaders and terrorists to hide their financial activities and convert their money into seemingly legitimate assets. Real estate properties in Vancouver, Toronto, Montreal and other Canadian cities have become favoured vehicles for international money laundering.

This has driven up housing prices as many of these foreign-owned properties remain vacant.   In late 2017 Canadians for Tax Fairness started a joint campaign with Transparency International Canada and Publish What You Pay Canada coordinated by Sasha Caldera to get our governments to create a centralized and accessible public registry of true or “beneficial” owners of corporations, real estate and trusts. Having an open accessible registry would not only prevent money laundering and terrorist financing activities, but reduce tax evasion and corporate corruption as well. Other regions, including the UK and European Union countries have already committed to lift the shrouds of secrecy by establishing public registries of the beneficial owners of corporations.

We are already making progress. In its 2018 budget bill, the federal government took the first steps to establish a registry by requiring federally-incorporated corporations and trusts to keep records of who their beneficial owners are—but this was just one step forward. The registry needs to be national, including provincial information, centralized, public and accessible.

In early 2019, we published a research report with our partners that revealed the extent of anonymous ownership in Toronto’s real estate that garnered considerable media attention, “Opacity – Why Criminals Love Canadian Real Estate (And How to Fix It)” building on the 2016 study ‘No Reason to Hide: Unmasking the anonymous owners of Canadian companies and trusts’ which shone a light on role of money laundering in Vancouver real estate.

As a result of our strong advocacy on this issue, the BC government has released reports that reveal the extent of Canada’s money-laundering problem and made a commitment to establish a public beneficial ownership registry. We are making progress convincing other provinces and Ottawa to do so as well. We’ve been working closely with anti-money laundering experts, lobbying governments, getting key private sector organizations in support, and achieving a lot of media attention. The federal government is responding to our pressure. It recently announced open consultations with the provinces and territories to explore the benefits of a public registry.   Politicians are clearly aware of the problem and how it should be fixed. What we need now is for them to translate this into concrete action.

Go to our new website www.endsnowwashing.ca to lend your voice and help support our campaign for greater corporate transparency.

CAMPAIGN: LEVEL THE DIGITAL PLAYING FIELD

Your local bookstore or video store—if you still have one—probably paid more corporate taxes in Canada than Facebook, Amazon, Netflix or Google did, despite being some of the largest and most profitable companies in the world.  These foreign digital giants can easily exploit Canadian and international tax rules to minimize their taxes, both in Canada and around the world.

This tax preference for foreign internet giants hurts us twice over, by depriving our governments of hundreds of millions in revenues, and by undermining Canadian producers. Digital services are no longer a niche area and now also include billions spent by Canadians on advertising through Google, Facebook and others, and any service sold through an international e-commerce platform, such as Uber or Lyft rides, lodging through AirBnB and much more.

As the dramatic shift to online advertising puts more money into the pockets of these giants, Canada’s struggling print and traditional media sector continues to lose revenue to powerful multinationals that have a made-in-Canada tax advantage over domestic producers, and generate no original content, instead taking it from the same media producers that they’re also taking advertising dollars from. As a result we’ve seen thousands of jobs lost, dozens of outlets closed in the media sector, and many businesses in other sectors also struggling.

C4TF has campaigned with other allies to level the digital playing field so Canadian producers can remain competitive and we can maintain a vibrant media and culture sector. We’ve published opinion pieces in major papers, lobbied politicians and senior government officials, and conducted public campaigns. Quebec became the first province in Canada this year to introduce a sales tax on digital companies such as Netflix and Amazon, followed by Saskatchewan. Quebec now estimates its revenues from these measures will be double their initial expectations.

This isn’t just a Canadian problem: the OECD identified taxation of the digital economy as the top priority in its BEPS action plan in 2013. Since then, the overwhelming number of OECD and G20 countries have taken action in different ways on this issue, but regrettably the Canadian government is one of the very few that haven’t.

But there’s good potential for progress this coming year. The House of Commons Trade Committee took our advice and urged the federal government to tax foreign e-commerce companies. The Auditor-General also recently took the federal government to task for not acting on this issue.

OTHER ISSUES WE’VE BEEN WORKING ON

Corporations, pay your fair share!

This coming year we are launching another priority campaign  - getting corporations to pay their fair share of taxes. Canada’s nominal corporate tax rate is about half what individuals pay, which contributes to income shifting and tax avoidance, while many corporations pay far less. Steep cuts to corporate tax rates over the past two decades haven’t led to higher business investment; on the contrary, investment rates have declined, while corporate profits and cash surpluses have surpassed record levels and rates. Yet the governments of Ontario and Alberta are planning to cut corporate tax rates further. We’re going to fight back, exposing how little major corporations pay and how ineffective corporate tax cuts have been.

Progressive environmental and carbon taxes

Climate change is advancing at an alarming rate. Now, more than ever, we need strong policy solutions that come down hard on large polluters while assisting vulnerable populations to transition to a more sustainable economy. Canadians for Tax Fairness has long advocated for a progressive carbon tax. We were encouraged to see the federal government adopt a system largely consistent with our recommendations for households, with a large majority of households better off after receiving the carbon tax rebate. However, the federal carbon tax system is light on large emitters and needs to be significantly strengthened. Carbon taxes are only a small part of the solution. We need a wide range of measures to address the problem. Canada needs to stop subsidizing the fossil fuel industry and make bigger investments in green technologies, infrastructure and employment, and in a just transition.

Gender tax justice

While the federal government has put a lot of emphasis on gender equality, until recently it hasn’t addressed the tax side of this. Most tax loopholes provide much larger benefits to men than to women. We’re collaborating with Inter Pares and international gender tax expert and Queens Law professor Kathleen Lahey on a SSHRC-funded project on gender tax justice in developing countries. Our partner, the Global Alliance for Tax Justice, is also putting a major priority on gender tax justice.

Tax fairness for low and middle incomes and working families

While our major emphasis has been on pushing for the affluent and corporations to pay their fair share of tax, we also advocate for more progressive tax measures for lower and middle incomes. But progressive tax policies and tax benefits don’t do any good if those entitled to these benefits don’t receive them—and many don’t. We’ve pushed for the CRA to make tax filing easier and simpler, including introducing pre-filled tax forms. This would make tax filing easier and more accessible for most of us, saving Canadians millions of hours and billions of dollars that they spend on filing their taxes, while helping everyone receive the important benefits and credits that they need.

Paying for Pharmacare

A national pharmacare program, what it would look like and how to pay for it, will be an issue in the coming election. C4TF executive director, Toby Sanger and David Macdonald of the Canadian Centre for Policy Alternatives, published a report that analyzes different options of paying for a national program and how it would affect different households.  A Prescription for savings outlines how progressive funding options would leave a large majority of Canadian households better off.

GOODBYE TO C4TF STAFF

On behalf of all staff and board members, both past and present, we would like to thank our former executive director, Dennis Howlett, for all the work he did establishing Canadians for Tax Fairness as a recognized and credible voice for tax justice, and for his ongoing commitment and contributions. Even in retirement, he continues to campaign for fairer taxes through his involvement with the Global Alliance for Tax Justice and in many other areas.

Last year we also said goodbye to Diana Gibson, our former communications director, who also contributed much in research and policy depth. Diana was responsible for our 2017 report, Bay Street and Tax Havens, the organization of the Canadian Coalition for Tax Fairness to counter anti-tax business lobbyists, and the research and writing of numerous media materials, from fact sheets and blogs to op-eds, breaking down complicated tax policy into accessible messages for the media and public.

Thank you for your expertise and dedication in spreading the tax fairness movement and engaging Canadians far and wide.

FINANCIAL STATEMENTS

BOARD OF DIRECTORS

• Scott Chamberlain  (Chair), General Counsel, Association of Canadian Financial Officers
• Peter Bleyer, President, Peter Bleyer and Associates
• David Langille, Lecturer, York University
• Lars Osberg (from 2019), Professor of Economics, Dalhousie University
• Sune Sandbeck (from 2018), Senior Economist, Canadian Labour Congress 
• Emily Watkins (Secretary), Special Advisor to the President, PIPSC
• Murray Dobbin, Author, Political Commentator
• Andrew McNeill, National Union of Public and General Employees
• Richard Rizok (from 2019), Senior Program Analyst, Infrastructure Canada
• Cheryl Stadnichuk (from 2019), Chair, CCPA Saskatchewan board
• David Bruer (Treasurer), Program Manager, Inter Pares
• Patricia Lane, Lawyer, Mediator
• Bruce Moore (to 2018), Activist, Board member, Transparency International
• Chris Roberts (to 2019), Director, Social and Economic Policy, Canadian Labour Congress
• Cliff White (to 2018), Activist, Chair, Nova Scotians for Tax Fairness

The C4TF Team: Toby Sanger, Erika Beauchesne, Sasha Caldera 

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