Ottawa (08 April 2021) — This week the International Consortium of Investigative Journalists (ICIJ) reported that more than $1.36 billion in taxes and penalties has been recovered by different countries as a result of the Panama Papers leak. This total doesn’t include the amount from the United States, but the United States is following up, and at least 2 people named in the Panama Papers have received prison sentences.
The Panama Papers were leaked documents from a Panamanian law firm, Mossack Fonseca, which provided information on how wealthy individuals from around the world were using tax havens to avoid paying their share in taxes.
894 Canadians and Canadian companies identified in Panama Papers, but no charges laid
The Canada Revenue Agency (CRA) identified 894 Canadians and Canadian companies together through the Panama Papers leak, but as of last week no charges had been laid. Even though it has been 5 years since the Panama Papers leak, only 35 audits have been completed. Another 160 are still ongoing.
As the executive director of Canadians for Tax Fairness, Toby Sanger, put it, “We've just seen too little compared to what's happened in other countries.”
There have been concerns for many years that the CRA does not have the resources to go after wealthy individuals and companies using tax havens. Given that it is 5 years since the Panama Papers leak, and that 160 audits have still to be completed, those concerns seem justified.
Weak Canadian laws on use of tax havens mean high compliance rate not necessarily good news
There are legitimate reasons for owning a shell company in a tax haven and that may be why the CRA decided that roughly 60% of the Canadian individuals or companies were not breaking the law. Unfortunately, recent court cases have just shown some weaknesses with Canadians laws that are supposed to limit the use of tax havens.
Last year the CRA lost a case against Cameco over a $2 billion tax bill that the company was able to avoid by using a tax haven. In February of 2021, the Supreme Court of Canada dismissed an application by the CRA to appeal the decision.
This came after the CRA lost another high-profile case related to tax havens — this time over Loblaws use of a tax haven to avoid $368 million in taxes. That case is currently before the Supreme Court, but the problems the CRA has had enforcing the laws on tax havens suggests that they are urgently in need of tightening up.