Report on Business | B2, Words: 663
by: Bill Curry
The NDP is calling on the minority Liberal government to tackle the corporate use of offshore tax havens and consider a wealth tax as part of any plan to address the large federal deficit and growing debt load created during the COVID-19 pandemic.
The request comes as Finance Minister Bill Morneau is preparing to release an economic and fiscal snapshot on July 8 that will provide the first official estimate of this year's federal deficit since a report in December that was issued before the pandemic.
The Parliamentary Budget Officer (PBO) has said this year's federal deficit could exceed $256billion, up from December's projection of $28.1-billion. Last week, Fitch Ratings downgraded Canada's triple-A credit rating to double-A-plus in light of concern over the growing public debt at both the federal and provincial levels this year because of emergency pandemic spending.
In a letter to Mr. Morneau and Revenue Minister Diane Lebouthillier, NDP MPs Peter Julian and Matthew Green point out that a top Canada Revenue Agency official recently told Parliament that the agency needs new legislative powers in order to fight offshore tax evasion.
"I think there is an opportunity now for Mr. Morneau to finally tackle these issues that the Liberals have not wanted to tackle," Mr. Julian said in an interview.
"In terms of how the federal government puts in place services and deals with its fiscal situation, there's only two ways: One is to massively cut services. The other is to finally tackle the big tax cheats, and the PBO says it's $25billion a year. That alone would make a significant difference in terms of tackling Canada's fiscal situation."
The Liberal government relied on the support of the NDP for a key vote in May that suspended regular House of Commons sittings in favour of meetings of a temporary COVID-19 committee.
The Conservative Party and Bloc QuÃ©bÃ©cois strongly opposed the plan.
Of the three main opposition parties with enough votes to help the Liberals win confidence votes, the NDP has recently emerged as the most frequent source of key opposition votes for the government.
Ted Gallivan, assistant commissioner of the CRA's compliance programs branch, recently told MPs on the House of Commons finance committee that the CRA has challenged the offshore tax practices of large Canadian companies, only to have its enforcement efforts overturned in court.
"I think we have to invoke the need to close loopholes," he said on June 16.
In response to questions from The Globe and Mail, CRA officials said examples of loopholes that could be closed include granting the CRA new powers to access records such as accounting working papers and increasing penalties for serious offences to act as a deterrent.
The NDP has also asked the PBO to update its cost estimate of an NDP campaign pledge to implement a wealth tax of 1 per cent of net wealth above $20million. The PBO reported last year that such a policy would initially raise $6-billion a year, rising to more than $9-billion a year by the end of the decade.
However the PBO also cautioned that its estimate had "high uncertainty" because wealthy families would likely change their financial planning in order to reduce their exposure to the wealth tax.
MaÃ©va Proteau, a spokesperson for Mr. Morneau, said the minister thanks opposition MPs for their input and that combatting tax evasion is a government priority. She said the government has already increased funding for the CRA and updated tax legislation, while working with other countries on international tax agreements.
Member countries of the Organization for Economic Co-operation and Development and the Group of 20 have been negotiating a global plan to fight tax evasion. Those talks were moving toward an end-of-year deadline, but U.S. Treasury Secretary Steven Mnuchin called this month for a "pause" in the discussions owing to COVID-19.
Britain, France, Italy and Spain responded to Mr. Mnuchin last week by suggesting a phased approach to new global tax rules, rather than a pause.