Don speaks to the Parliamentary Assembly of the Council of Europe on fiscal and social justice

Tuesday, October 11, 2016 – Strasbourg

Mr Don DAVIES (Canada, Observer) – I am honoured to speak today on fiscal and social justice and public trust in our democratic system. The release of the Panama papers has alarmed us all. It is yet another reminder that we must be vigilant to improve the integrity of our tax system to ensure that it is fair for all.

      Every democratic society is based on a social contract. Citizens agree to pay taxes in return for vital government services, such as education and health care, as well as the general benefits of stability, security, opportunity and a good quality of life. Citizens’ willingness to pay their taxes in full and on time is based not only on the effectiveness of government in delivering services, but on the equity of the system – the principle that everyone should pay their fair share of taxes. That does not mean that everyone should pay the same amount or face the same tax rates. Those with lower incomes have reduced means to pay, while those who earn more pay higher taxes because they have a greater ability to do so. That is why Canada has a graduated system, with increasing tax rates for those with higher incomes.

      As with most countries, voluntary compliance is essential for Canada’s tax system. We rely upon taxpayers to honestly report their domestic and foreign income and to pay the appropriate taxes owing. When individuals or corporations fail to do so and use complex structures to shift income between jurisdictions or hide their income in offshore accounts, the integrity of the tax system is undermined. If that is not prevented, citizens come to view their tax system as unjust, their trust in government is eroded and they will be less likely to pay their taxes in full and timely manner. If that failure becomes widespread, the ability of the State to fund important services is compromised. Black markets and underground economies can arise and do deep damage.

      The unfortunate reality, however, is this: while most citizens pay their fair share of taxes, certain wealthy individuals and corporations are avoiding paying taxes by using aggressive tax planning and keeping their wealth in tax havens. It is estimated that Canadian corporations and individuals transferred $40 billion to tax havens in 2015. The total amount of Canadian wealth held in the 10 most popular tax havens is thought to be $270 billion. That represents billions of dollars in lost government revenue that could be used to create childcare spaces, improve health services or reduce poverty. It is time to end the secrecy and the attempts by some nations to create havens for tax evasion and avoidance. It is time for a worldwide central coordinating body with the power to impose strong sanctions on offending jurisdictions. It is time that all nations committed resources to aggressively audit and clamp down on tax evasion within their borders. Democracy and our social contract demand no less.

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