Friday, October 16, 2015

Conservative government revenue agency signed agreement with lobby firm

The incestuous relationship between the Conservative government and business is evident in an agreement between the Canadian Revenue Agency(CRA) and the Chartered Professional Accountants of Canada(CPAC)
CPAC represents and lobbies for most accounting firms in Canada. Revenue Canada described the alliance formed in November of last year as a "new era of information and collaboration" between the CRA and the CPAC. The agreement was signed by Andrew Treusch, CEO of CRA, and Kevin Dancey, head of the CPAC. The deal calls for joint committees with senior representatives from each group. This ensures the CRA will consider the accounting groups "input" into any changes to its programs, a government news release claims. Dancey said that the CPAC valued its role as a trusted adviser to the CRA.
The partnership could represent a conflict of interest. At the same time as the CRA, CPAC partnership was being formed, the CPAC was fighting a court battle against the CRA which was attempting to gain access to the files of multimillionaire clients who had stashed millions in tax havens. The CRA was attempting to get the list of wealthy clients of the huge multinational KPMG who were enrolled in an offshore tax scheme on the Isle of Man.
KPMG is one of the biggest four tax auditors in the world but also provides other services such as tax advice. In 2014 it had revenues of $24.8 billion US and 162,000 employees.Although it has headquarters in the Netherlands it has offices around the world including Canada The CRA said in 2015 it believes that Isle of Man scheme was designed to evade taxes:In 2015, KPMG has been accused by the Canadian Revenue Agency of Tax evasion schemes. "The CRA alleges that the KPMG tax structure was in reality a "sham" that intended to deceive the taxman.
Prime Minister Harper met with the both the CPAC and heads of the KPMG plus other accounting firms just three months before the deal. The meeting was recorded in a federal register of lobbying meetings. Ray Novak and two other aides were there as well. The Prime Minister's Office(PMO) claims the meeting was a routine "stakeholder" meeting. While this may be the perception of the PMO office, Dennis Howlett of Canadians for Tax Fairness saw it differently: "This is a serious problem, certainly a perception of conflict of interest. The government shouldn't be cozying up to companies that they've taken to court over very serious allegations. When they get in bed with the very companies that they're supposed to be regulating, it leads to all kinds of dangerous results,"Duff Conacher a teacher of government ethics at the University of Ottawa said the agreement could send mixed signals to the CRA staff : "It sends a very bad message. Essentially it says don't enforce laws fully and properly because the government is now a partner with this organization and you wouldn't want to make the government look bad." Howlett also claims CPAC is nervous that the government may get evidence it needs to show that the the KPMG scheme involves tax evasion, which could threaten the whole system of offshore tax havens: "They're nervous that if the government… gets the evidence they need to pursue another case against KPMG, then this whole house of cards, of sham companies and offshore banking, is going to come tumbling down."
The CRA case against KPMG mysteriously stalled for over two years and only after a whole series of stories about the issue in CBC News and Radio did a KPMG lawyer announce just recently that an out-of-court settlement had failed and that the two sides are asking for a hearing before a judge. KPMG denies that the case has anything to do with tax evasion. One CBC article gives details of how one weatlhy Canadian couple benefited from the scheme.
The CBC obtained court documents showing that in 2000 Peter Cooper and his two adult sons signed up for a KPMG tax product in the Isle of Man designed for "high net worth" Canadian residents. The scheme promised that those joining the plan would pay no tax on their investments. The documents show that between 2002 and 2010 the Coopers paid little or no tax even though they received nearly $6 million from an offshore company. The KPMG lawyers claim any money received by the Coopers were "gifts" and non-taxable. Marshall Cooper claims that when he came to Canada from South Africa in the 1990's he simply went to what he thought were the best people for tax advice. He is hardly to blame. If you were advised by one of the four largest auditing and tax-advice firms in the world to participate in a plan that could save you huge amounts of money on taxes would you say no because it looks unethical? Nor can one place much blame on KPMG, which by the way has numerous awards for good corporate citizenship. The KPMG mission is to get the best tax deals it can for its clients. It is the government that has allowed these tax loopholes to exist and even has a cozy relationship with the very firms that are subject to Canadian tax laws. The tax haven issue is global and not restricted to Canada as the appended video shows.

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