The leak of the Panama Papers have not only exposed specific greedy individuals, but the general way in which capitalism works—where imperialist nations create havens for wealth while denying havens for refugees, and governments use the resulting tax losses and further tax cuts to impose austerity.
Tax havens and imperialism
The Panama Papers involve 11.5 million documents from Mossack Fonseca, a Panamanian law firm specializing in tax havens—many in the Caribbean. Canada is not just incidentally named in these papers but has played a central role in the creation of these tax havens. Canada has a long history of imperialism in Latin America and the Caribbean, where Canadian corporations have benefited from military coups. In 1917 the Royal Bank of Canada set up a branch in Haiti in the wake of the US invasion. Canada was jointly responsible for the 2004 coup in Haiti which has benefited the Canadian garment industry, and Canadian mining corporations have benefited from the 2009 coup and ongoing violence in Honduras.
As Alain Deneault explains in Canada: A New Tax Haven: How the Country That Shaped the Caribbean Tax Havens is Becoming One Itself, “If we want to understand the relationship between Canada and today’s tax havens, we need to understand Canada’s direct contribution to the genesis of some of these jurisdictions. Because Canada had trade relations with British dependencies in the Caribbean long before they became tax havens, and because Canadian banks had played a key role in the Caribbean since the early twentieth century, Canada was a major player in their transformation.”
While the Panama Papers name 350 wealthy Canadians, many previously unknown, there is a long history of the most known and powerful Canadians benefiting from tax havens—from CK Irving, who has sheltered his wealth in Bermuda, to former Prime Minister Paul Martin whose family shipping business (Canada Steamship Lines) has a subsidiary in Barbados.
Economic crisis and austerity
The economic crisis created a further drive for the 1% to hide from taxes. The wealth Canadians have declared in offshore tax havens has skyrocketed, from $11 billion in 1990, to $155 in 2012, to $200 billion today. This creates an estimated $8 billion annual loss in tax revenue, though the exact amount is unknown because the Canada Revenue Agency refuses to calculate the tax gap.
Reacting to the leak, CRA claimed it “continues to pursue audits related to offshore tax evasion including some Canadian clients associated with law firm Mossack Fonseca.” But how is it supposed to effectively collect hidden taxes if it’s not even aware of the scale of the problem? The Panama Papers reveal that the Royal Bank of Canada alone has created more than 370 shell companies for tax evasion.
One of the main responses to the leak has been to justify it in legal terms. As lawyer Martin Kenney, brother of Jason Kenney, claimed: “It’s tax efficient. It’s not unlawful. It’s not tax evasion. It’s lawful tax avoidance.” At the same time, and with the same rationale, Canada itself has become a tax haven—with record low corporate taxes after years of tax cuts by both Liberals (like Paul Martin as finance minister and Prime Minister) in the 1990s and Conservatives.
For years the Liberals and Conservatives have used budget deficits to justify slashing healthcare, education and other social services, when these deficits were artificially generated through low corporate taxes and offshore “tax avoidance.” Trudeau and the Liberals supported Harper’s free trade deal in Panama, and in the latest budget Trudeau has continued Harper’s corporate tax cuts—artificially creating a budget deficit to claim he’s spending on First Nations and infrastructure.
Create a haven for refugees, not the 1%
The Panama Papers not only serve as a reminder of the way the 1% hide their own wealth while imposing austerity on the 99%, but also expose the scapegoating of migrants and refugees. While imperialist nations make use of the Global South as a haven for their wealth, they refuse to provide a haven for refugees fleeing imperialist war. While making tax avoidance increasing legal, capitalist states have increasingly criminalized refugees.
Governments have cut refugee health while scapegoated refugees for cuts to healthcare, and exploited refugees while scapegoating refugees for the economic crisis. While RBC was using tax havens abroad, it was also using the Temporary Foreign Worker Program to exploit migrant workers in Canada.
Reacting to the Panama Papers, Trudeau stated that “Our government has long known — indeed, we got elected — on a promise to make sure that people were paying their fair share of taxes.” As well as demanding the release of the individuals and corporations within the Panama Papers, we also need to push Trudeau:
* demand the CRA disclose and then eliminate the tax gap,
* restore corporate tax cuts so Canada is no longer a tax haven
* close trade deals and open the borders: create a haven for refugees not the 1%
Join the conference Ideas for Real Change: Marxism 2016, including the session “Why is capitalism in crisis,” “Canada’s ruling class,” and “Refugees, racism and resistance.” Register today and join/share on facebook.