There has been scarcely a peep out of Ottawa since last winters promise to crack down on companies that stash their cash in offshore tax havens.
The silence was particularly acute last week, when the OECD (Organization of Economic Cooperation and Development) came out with a seven-point action plan to prevent multinational corporations from using low-tax or no-tax jurisdictions to hide their assets. Canada was one of the countries that called loudest for a co-ordinated international approach. But when the Paris-based agency delivered its blueprint, there was no acknowledgement from Canadas finance minister, revenue minister or any other member of the federal cabinet.
Catching tax cheaters was a Conservative priority when the late Jim Flaherty delivered his 10th and final budget last February. He affirmed the governments determination to combat international tax evasion and aggressive tax avoidance. That followed his 2013 to change the Income Tax Act to flush out businesses that hid their assets abroad. In 2012 he closed several tax loopholes that allowed Canadian companies to set up shell companies and create partnerships in offshore tax havens.
But the governments ardour seems to have cooled lately.
The OECDs Sept. 16 report identifying actions countries can take right now to stem the outflow of taxable income should have been welcomed in Ottawa. Canada cant tackle this issue alone. It is a global problem; one that will grow as technology becomes more sophisticated and persist until nations take collective action.
But harmonizing tax international standards has become politically awkward for Prime Minister Stephen Harper.
Under his government, Canada has reduced its corporate income tax rate to the lowest level in the G7. Harper boasts about this achievement, claiming it brings in foreign investment, spurs growth and creates jobs. He will undoubtedly use that sales pitch in next falls election.
Aligning Canadas corporate taxes with those of other countries would undercut its advantage as investment magnet. Participating in an internationally transparent system of corporate taxation, as the OECD proposes, would allow voters to see who is paying for Ottawas deficit-elimination drive.
There is a second complication. The tax department is quietly reducing its efforts to hunt down multinationals that use overseas tax havens. Canada Revenue Agency (CRA) hasnt announced any wind-down but its corporate business plan for the years 2014-2017 shows a decrease in the share of its budget allocated to offshore compliance.
According to the Professional Institute of the Public Service of Canada, which represents the 7,000 auditors employed by CRA, the government has begun disbanding many of the international teams it set up 18 months ago. Fifty senior tax auditors who led overseas enforcement teams have been told their jobs will be eliminated. The department is shifting its staff to accommodate Ottawas new flavour-of-the-month: cracking down on charities that engage in political activities.