Honourable members, today ACFO has provided you with the just-published policy paper outlining actions parliamentarians can take as leaders against tax exploitation.
Our members represent the core of the federal government's finance workforce. We understand how important collecting taxes is to our ability to deliver vital public services, and that fiscal responsibility requires both prudent spending and revenue collection.
Polls show that Canadians believe there are two sets of rules when it comes to paying tax: one for the rich, and one for the rest of us. Canadians work hard. We do our part for the community, and we expect our fellow Canadians to do the same. The government has shown the courage to stand up for the real engines of our economy: Canadians and our small businesses who pay their taxes and choose not to cheat the system.
There is no justification to dodge taxes. Our corporate tax rates are highly competitive. Canada has the second-lowest combined corporate tax rate in the G7, according to the OECD. Canada ranks ninth out of 189 countries for ease of paying taxes, according to the World Bank and a PricewaterhouseCoopers study from 2016. A 2016 KPMG study ranks Canada as the most competitive country for business globally, based in part on our low corporate tax rates and moderate labour costs.
In the 2016 budget, Canada committed to working with the OECD and its action plan on tax avoidance. We applaud the millions invested in the CRA and the thousands of new investigations and audits recently announced. We support complementary measures to collect tax from digital service providers, to enhance country-by-country reporting, and to champion international tax reform at the UN as well as the OECD.
However, we cannot rely solely on enhancing the OECD process, relying on large-scale data leaks, audits, and litigation. We also need proactive methods that deter tax exploitation before it occurs, such as mandatory vetting of tax-planning products, required reporting of potential tax dodging, a beneficial ownership registry, and significant fines for non-compliance. Let me expand on these four examples.
The individuals and companies engaged in tax dodging have one thing in common: they all use professional facilitators to profit from and exploit legal grey areas. These lawyers, accountants, and financial professionals find ways to bend rules to gain advantages that Parliament never intended.
As a lawyer who represents thousands of chartered accountants, I find the role of these facilitators particularly concerning. Between what we commonly call tax avoidance and tax evasion lies a vast and layered wasteland of secrecy that we label tax exploitation.
You can place reasonable limits on this exploitation by requiring that all tax-planning products be registered and vetted before facilitators are authorized to market them to their clients, as is the case presently in the U.S.; and by legislating a positive duty on facilitators to confidentially report suspected tax abuse to law enforcement, as is the case in the U.K.
Canada must recognize and address our role in global tax dodging. Apparently, we are a great place to set up an anonymous shell company. Mossack Fonseca marketed Canada to its clients in precisely this way. A primary purpose of these shell companies is to obscure the truth of ownership and the truth of economic activity of these companies. They facilitate money laundering, terrorism, criminal corruption, and tax exploitation.
The federal government must work with the provinces to ensure that all companies in Canada are required to disclose beneficial ownership in a single unified national registry that's open to the public, as is the case in the U.K.
The current system clearly does not deter tax exploitation. In fact, it encourages facilitators profiteering while passing the entire risk and cost of non-compliance to their clients. Facilitators who fail to comply with these simple transparency measures should face fines equal to the tax avoided, as is currently being proposed in the U.K.
Our proposals provide a real deterrent to tax exploitation. They provide effective consumer protection to clients of the tax industry. They secure public revenue. And they significantly reduce the costs associated with the reactive litigation-based system we currently have in place.
The gaps in our tax law provide a large benefit to a small number of Canadians, which is both fiscally irresponsible and erosive to public services.
All Canadians need to pull their weight and play by the rules if we're going to deliver on this government's agenda of infrastructure investment, reconciliation with our indigenous people, pay equity, growing the middle class, and supporting sustainable economic growth.