OTTAWA — Details are still being sifted from the hugely anticipated second global data leak that names people, companies and tax schemes connected to offshore entities — many with familiar names.
Legal or otherwise, the new cache of thousands of financial dealings released Monday from the Panama Papers include information on more than 200,000 investment vehicles from law firm Mossack Fonseca, including the names of 625 Canadians.
Canada’s tax authority has had access to the data in Monday’s Panama Papers “since last week,” said Chloe Luciani-Girouard, a spokeswoman for the revenue minister.
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“So, the work is already underway within the CRA,” Luciani-Girouard said.“So far, I know they (agency officials) have identified appropriately 45 taxpayers who were clients of Mossack Fonseca that are currently being considered for audits and, with the important amount of data, they are going to keep working in that vein.”
The Panama-based law firm has become synonymous with rich-getting-richer schemes by using often-illegal tax havens in less-regulated parts of the world.
The International Consortium of Investigative Journalists, the group that posted data in a searchable database on Monday, was also responsible for the release of a similar data trove last month. While there has been the expected outrage over tax loopholes in investment regimes, the Panama Papers have also put a fire under regulators to tighten tax loopholes and in Canada and elsewhere.
“There’s an international effort underway to crack down on tax avoidance. This is an international issue,” said Craig Alexander, vice-president responsible for economic analysis at the C.D. Howe Institute. “It’s an issue that has been out there for a very long period of time, but it’s really come to a head now. And I think one of the reasons why it has is because economic growth around the world is weak and governments everywhere are in desperate need for additional funding.
“So when fiscal revenues are not flowing in the way you needs them to, you create a huge incentive to ensure that people are actually paying all their taxes that is owed,” said Alexander, who was previously chief economist at TD Bank.
That appeared to be the case for Stephen Harper’s Conservative government when finance minister Jim Flaherty launched a so-called “snitch” program in 2013 that paid people to report illegal tax arrangements at a time when Ottawa was focusing on getting the country out of a recession-generated budget deficit.
The Liberal government, led by Justin Trudeau, has earmarked $444 million to increase the CRA’s muscle for fighting illegal offshore tax schemes. From that investment, Ottawa expects to receive additional $2.6 billion in tax revenue over the next five years.
As well, the CRA opened a special branch to “focus exclusively on international tax, aggressive tax planning, large businesses, criminal investigations and strategies to combat offshore tax avoidance,” CRA chief executive Andrew Treusch told the House of Commons finance committee last week.
Treusch also said the CRA has increased the number of auditors by 20 per cent since from 2006, to more than 6,400.
Revenue Minister Diane Lebouthillier is scheduled to appear before the finance committee on May 19 — one day after the deadline for accounting giant KPMG to hand over documents on Isle of Man tax schemes, including the names of the company’s employees responsible for development and marketing of those schemes.
One national organization has dismissed the current round of hearings by Canadian lawmakers on tax scams, saying “a partisan committee dominated by Liberals can’t impartially investigate what happened during a previous Conservative government.”
“An independent, impartial public inquiry is needed to find out the whole truth about whether the CRA’s relationship with big accounting firms has allowed their wealthy clients to get away with cheating on their taxes,” Duff Conacher, co-founder of Democracy Watch, said in a recent statement.
Hearings by the finance committee are “not enough to find out the whole truth because committees are kangaroo courts made up of partisan politicians judging other politicians and past governments.”
Democracy Watch also wants Ottawa to increase the current “cooling off period” for former government employees to five years from one year to help avoid any conflicts of interest in dealings with the private sector.
The issue has, indeed, found global legs.
Officials from major industrialized nations are meeting this week in Beijing to push for greater tax reforms to deal with tax havens outside of the jurisdiction of local authorities. That meeting followed a similar gathering last month in April. More are planned in the coming month.
These meetings are “looking for ways the international community can work together, because with the Panama Papers story, Canada can’t act alone,” said a spokesperson for Lebouthillier, the revenue minister.