Denmark and Poland have recently stipulated that companies registered in offshore tax havens cannot access financial aid packages. As countries spend trillions to stabilize their economies, how should tax avoiding companies be held to account?
In short: Canadian companies hid $353 billion in tax havens in 2018, yet many of them will likely be eyeing up the economic aid packages announced in Ottawa. The government can and should place limits on what tax avoiding companies can receive.
Following Europe’s lead: On April 20th, Denmark and Poland stated they would not provide aid to companies registered the the European Union’s list of “non-cooperative tax jurisdictions“.
Canada announced more than $30 billion in economic stimulus to try and stem the loss of jobs and income due to COVID-19. With the IMF predicting that Canada’s economy will shrink by 6% this year, the stimulus packages must be used as efficiently as possible. One way to do would be to ensure that companies that have benefited from tax avoidance schemes do not soak up bailout relief.
- The Parliamentary Budget Office announced that Canada lost $25 billion from illegal tax avoidance schemes in 2019.
- If it desired to do so, the Canadian government could put together a public registry of known tax haven abusing companies as done in the EU.
- The companies could still be able to apply for loans, but financial assistance would be priorities to companies that didn’t abuse the system.
In Parliament: As the the house of commons reconvened to vote on arrangements on how parliament would be held over the coming months. The topic of tax havens came up but was not engaged on by the government.
It will be interesting to see whether the Canadian government decides to consider this approach now that idea seems less radical. With more countries potentially passing similar legislation, a movement around increased tax fairness may grow.