Tuesday, March 8, 2016

CRA* grants amnesty to tax dodgers, clients of KPMG...just another story about RICH POWER!!

We know that Canada is not the United States. Income inequality is less noticeable and therefore less newsworthy in Canada than in the U.S. And, although Canada pays inordinate attention to the findings of the Auditor General, as it “cares” about how the government spends its tax dollars.

Nevertheless, some of the same dynamics that are so graphically grabbing headlines in the U.S. play a role north of the 49th parallel.

Today, CBC reveals, through evidence handed to it in a “brown envelope” that the international accounting firm KPMG has been providing its most affluent clients a tax haven on the Isle of Man, thereby enabling those rich clients to evade paying tax on those sheltered dollars. And while Canada Revenue Agency will not say whether they will charge KPMG for concocting and executing the scheme, they do indicate that those clients, whose names they obtained through a court order, are being offered “amnesty” to “come in from the cold, and pay taxes on those previously sheltered funds. If they agree to pay back taxes, the story goes, they will not be charged. Some of the offending KPMG clients have agreed while others refused to come forward.

Predictably, lawyers for ordinary Canadians in conflict with CRA are more than a little disappointed that their clients are left without similar favourable treatment, while the rich are offered clemency. On the other hand, lawyers who work for high-end clients tell CBC that those clients can afford to pay for the ‘best legal advice available’ arguing that for CRA to take them on would be both costly and somewhat suspect.

And therein lies the rub: on the one hand, there is one approach for the rich, and quite another for the less affluent.

And while most will sigh and bemoan the “way the world works” borrowing the words of the Charles Schwab television commercial, when the young man asks whether his mentor gets his money back if he is not satisfied and hears with a smirk and a shrug, “No, that’s not the way the world works!” The inference, from Schwab’s perspective is that more questions might make the world work more advantageously for the client of their financial management firm.

And although the story merits coverage, potentially as a “CBC exclusive”, and will get some coverage in the financial pages of the dailies, there will be no public outcry, given Canadian deference to the wealthy and also Canadian deference to the government, unless and until there is a wave of protest to which they can add their voice. It is the slow, and almost imperceptible movement of public attitudes, in this case, toward amnesty for the rich with impunity, that eventually ensnares us all in its entangling web. This kind of evolution does not bring people to the barricades with their shotguns; this kind of story evokes barely a whimper from the public consciousness, and even less from the public conscience; and the people in charge of the CRA, whether they owe obedience and their jobs to a Liberal or a Conservative government, know that their political masters want above all else for them to take all measures available to avoid a public controversy. And the public, by and large, complies, especially in “nice” Canada.

Would this story play differently should a NDP government have been elected on October 19? Who knows?

Nevertheless, the public’s detachment, disillusionment, and even insouciance contributes to the margins of tolerable options available to the government, and thereby to the CRA. Does the public care if the rich are granted amnesty? Does the public wish that if amnesty is available to those who can and will purchase the legal services of the most professional and also most costly legal teams, it must also be available to ordinary Canadians? Does the public seek to put pressure on the current government, as overseers of the CRA, to bring both KPMG and their clients to “heel” through court actions? Or does the public prefer a “moderated” and “modest” and eminently Canadian approach that we are learning about from this story?

There is no single story that defines the Canadian culture; there is however, a confluence of events, personalities, headlines and backroom arrangements that cumulatively generate a conception of the ‘public good’ and that public good is an extremely fragile entity, requiring the close attention not only of the political nerds, but also of the ordinary people whose lives it will inevitably shape for decades. 

*Canada Revenue Agency 


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