How Canada Is Losing Billions of Dollars to Tax Havens

What Are Tax Havens?

A Tax haven is a country that allows individuals from foreign countries or foreign businesses with very little or no tax liability in an environment that is economically and politically stable. Another important aspect of such countries is that they do not provide information about the financial transactions to foreign tax authorities. For a person to benefit from the tax havens tax policies he or she need not reside in the country and this is an advantage to people looking to save tax. No financial information shared and no requirement to stay in the country acting as the tax haven will make it possible for a citizen of another country to run a business in the tax haven without his home country tax officials knowing about it. Countries are aware of these countries and are trying to ensure that they do not lose tax that is due to them because of the tax havens. However, even after continued efforts of the G20, tax haven countries are still operating with ease.

Which Countries Are Considered As Tax Havens?

There were very few countries that were tax havens about two decades ago. But over the past decades there has been an evolution in tax haven countries and there are many countries sovereign and non sovereign those are considered as tax haven countries. Some of the countries are

• Bahamas

• Panama

• Luxembourg

• Cyprus

• San Marino

• Monaco

• Seychelles

• Liechtenstein

• British Virgin Islands

• Mauritius

• Isle of Mann

• Belize

• Singapore

• Hong Kong

• Anguilla

How Canada Is Losing Tax Revenue Due to Tax Havens

Tax havens that allow rich individuals, resource companies and Canadian banks from paying billion of dollars in taxes every year are on the rise and according to recent estimates, it has been found that the Canadian federal and provincial governments are denied as much as $80 billion in tax a year. The amount that is lost is huge and accounts to about half of the national budget for health care in Canada. Canadian residents who have used tax haven countries for their offshore business activities will not declare the income from such businesses and therefore will not pay tax. A Canadian citizen or resident has to pay taxes for his or her worldwide income and as such countries do not share financial information with Canada, they can get away without showing the income generated from tax haven countries.

Steps Taken to Counter Tax Havens

With the use of tax havens becoming a global problem, there are many initiatives that are being taken by other countries including Canada to counter these countries, but in vain till now. But Canada is leading the way and has started a few initiatives like to publish the estimated tax lost due to such countries and what impact it has on the federal and provincial treasury. Canada has planned to increase the resources that are available in the compliance division of the CRA to enable them to track tax cheats. Canada is also pushing for strong action to be taken against tax havens at the G20 and in the United Nations.