Linda McQuaig

Linda McQuaig

Linda McQuaig is a journalist, public speaker and political activist who has authored 8 books, including several that have examined Canada’s tax system. In the ‘80’s she covered the fall of the Shah in Iran and, after award-winning writing for most of Canada’s leading magazines and newspapers, examined the relationship of Bay St. to the finance ministry in her 1987 book “Behind Closed Doors. Her most recent book is “The Trouble with Billionaires”, co-authored with one of Canada’s top tax law experts, Professor Neil Brooks. She is running for the NDP in the 2015 federal election.

BENGER: I was at the launch of Canadians for Tax Fairness in Ottawa and was interested in why you think there has been a rise in these Global Tax Justice Networks at this time?

LINDA McQUAIG: I think the rise of global tax justice networks now is explained by a few things. I mean, I think it’s partly the Occupy Wall Street movement. I mean, even though that ended, we don’t hear too much about it anymore. I think it had an enormous impact in raising awareness of this problem of all the money gravitating to the top. So I think that had a lasting impact.

I also think the impact of the 2008 recession and crash and ongoing recession and the brutality of that should have, by any logic, been a wake up call that this whole neo-Liberal agenda of catering to the rich and redesigning all our economic laws in their favour was not working and was extremely problematic.

But of course we haven’t seen that. Of course we’ve seen no correction whatsoever in the wake of that financial crash. And I think those things probably more than anything are driving this sense that something terribly wrong is going on that has to be corrected.

BENGER: I am astonished by the numbers about tax avoidance in Canada and how well established it is as a completely mainstream practice in Canadian business. Why is it not a better-known story in Canada?

LINDA McQUAIG: It is astonishing the sheer volume of tax avoidance and use of tax havens, and every now and then those numbers do surface and get virtually no attention. Or at least I shouldn’t say they get no attention, they get a little spurt of media attention but there’s absolutely no follow up.

And I guess it’s hard to draw any conclusion other than there’s just very powerful interests, basically the business elite that don’t want that issue highlighted and that, you know, in the absence of some powerful counterforce, let’s say a powerful labour movement — which we increasingly do not have — those numbers come out and then they’ll just be whisked away.

I mean, I’m struck that, you know, now we have this snitch line, this tax cheat snitch line introduced by the Harper government and the idea is, you know, we’re going to cut down on tax cheats and seems to be in line with their, you know, get tough on crime… In fact, that’s just a ludicrous approach to the problem. We have billions of dollars that are being moved, you know, into tax havens in order to avoid tax. The answer isn’t set up a snitch line, the answer is to go after that problem in the systematic way that we now know it can be addressed by.

But there’s absolutely no momentum, at least within Canada to go in that direction. So it’s hard to avoid the conclusion that it isn’t simply a question of power, that the interests that are at stake here, the amount of tax avoidance that’s going on is so beneficial to the very powerful interests in this country.

And they own the media, let’s face it. They are very influential in shaping government policy or influencing the shape of government policy. And they just want to keep it off the agenda and they do.

BENGER: I’ve done every story under the sun in my 30 years in Canadian journalism and documentary filmmaking except economics which I’ve avoided religiously. Because I don’t understand or know a lot about Canadian business economics, but what I am struck by is a reverence towards business. Taking a critical independent view of business causes a frosty reception. It came out at the launch when Bob Rae stood up and pissed on everyone’s parade and said, “You can’t get elected in this country by making the rich pay”. From your perspective how frustrating is it to deal with a national attitude that business is untouchable.

LINDA McQUAIG:: It’s fascinating that Bob Rae, of all people, would say, you know, you can’t get elected arguing for taxing the rich in Canada because he actually did get elected on that platform. I mean, that wasn’t his whole platform but in 1990 when he ran as leader of the NDP and the provincial election in Ontario and won a majority government, the key item in his platform was actually re-introducing an inheritance tax in Ontario.

And that was a popular item. Now, of course when he got in power he proceeded to set up a commission to, an inquiry to look into it and, you know, nothing came of it. So I don’t know, he might be able to argue it’s impossible to put these policies in place but he certainly can’t argue that they’re not popular.

I would argue that that was in fact, you know, part of what got him elected. It was a very populous platform he ran on.

And let’s not forget Andrea Horwath, the current NDP leader in Ontario, who actually refused, she held the balance of power in 2012 and in provincial legislature and refused to pass the budget supporting the liberals unless they introduced an added surtax on incomes over $500,000.

It seemed like a very controversial measure at the time, it was roundly denounced in business circles. One business leader went on TV calling it ethnic cleansing of the rich. And yet she held her ground and after a little while it became obvious that it was in fact a very popular measure among ordinary people and the measure went through. And it’s turned out to be not controversial at all particularly as time has gone on.

So I guess my point is I’m not for a second arguing that business isn’t an enormously powerful political force. It will flex its muscle and fight tax, you know, higher taxes every step of the way. That’s absolutely true.

I guess the only point I’d like to make is that I’m not convinced that a heavier burden on the corporate world wouldn’t actually play very well with Canadian taxpayers. I actually think it would.

I do find it interesting, this notion that you can’t criticize business, that if you criticize business you’re, I don’t know, unpatriotic or you’re out to destroy the economy or you’re just some raving socialist or whatever. That notion, I think, has become more pervasive over time.

I’ve been writing about this issue about inequality and all the money going to the top really since the mid-’70s, let’s say. And it’s just striking to me the, how the debate seems to narrow over time.

I mean, I can remember I guess it was in the early ’80s I was a reporter at the Globe and Mail and I can remember getting stories that would go on the front page of the Globe and Mail about how the rich were avoiding tax. And, you know, those stories would generate a fair bit of excitement and interest and controversy.

I think it’s harder to get that kind of story into the real mainstream media now. Every now and then something does surface but I don’t think the mainstream media is necessarily behind that kind of, I guess you could call it investigative reporting or it’s not even critical reporting.

BENGER: In your book 30 years ago, Behind Closed Doors, generally how would you say Canadian business won control over Canada’s tax system?

LINDA McQUAIG: In many ways the rich have always had control of Canada’s tax system, I guess that’s the bottom line. But I would argue that a unique opportunity came up that challenged that dominance basically in the 1960s.

For a bizarre series of reasons the Diefenbaker government appointed a Royal Commission into taxation. It wasn’t meant to shake up the tax system but ended up being, producing a very critical document which basically argued famously “a buck is a buck is a buck” meaning all income should be treated the same.

And of course if you treat all income the same and you get rid of special treatment for capital gains and dividend income and inheritances, boy, you’re revolutionizing the tax system and you’re doing it in a way that will be beneficial to ordinary people and disadvantageous to the wealthy.

So anyway, this report came out and basically what happened was that, even though it was a blue ribbon panel of accountants and sort of tax specialists, business connected people that had recommended it, the reaction from the business community was so fierce and so overwhelming and so over the top and distorted and misleading that they succeeded in beating back the very ultimately progressive ideas that were in that Carter Royal Commission Report.

And in fact it’s interesting because in the ’70s I think largely as a result of that Carter Commission and its very interesting progression findings, the business community became very organized. You know, I think that’s the genesis of a lot of the real business organization, highly organized business community that we see today.

And they were able therefore to later beat back other attempts. You know, we had a white paper on taxation from the Trudeau government in the early ’70s, they absolutely destroyed that. In the early ’80s, again, the liberal government under, well, Allan MacEachen was the finance minister came out with a surprisingly progressive document that wanted to close a lot of the loopholes that were very beneficial to the rich. Again, just absolutely destroyed by the overwhelming response, negative response to the business community.

So I guess I would say that the rich won control of Canada’s tax system by just being so organized and so aggressive and having the media so supportive because, again, the media is so heavily owned by the corporate elite and, you know, they see all kinds of merit in tax breaks for corporate interest.

So they were able to, to beat back these progressive, these attempts to make progressive reforms. And of course the flipside of this coin is that one of the reasons they’re able to do this is because, you know, ordinary citizens are just left out of the debate. That Royal Commission on taxation in the 1960s, it was, you know, they were supposed to investigate every aspect of the tax system to recommend changes did not even include — I think it was a 5 person panel — did not even include a representative from labour. It wasn’t considered necessary. It was all basically business and accounting people.

I mean, the tax laws are enormously complicated and the reason for that of course is the tax lawyers are always trying to figure out some way to run some new loophole that will save their clients some huge amounts of money and so it’s very complicated to counter that.

But in fact, the simple truth is the basic principles of taxation are not that complicated. The basic principles have always been fairly straightforward. And what business does is use this complexity, this technical complexity to argue sort of hands off this area. People can’t deal with it, you know in order to get what they want.

BENGER: Does this mean that business is getting a free ride in this country?

LINDA McQUAIG: What this ultimately means is that business is getting really a free ride and nobody’s really paying attention. And it’s interesting that in some ways it’s sort of ends up in the hands of the Supreme Court where there again sort of the, you know, we see a kind of caving in to the power of business.

Which is interesting because the Supreme Court in some other areas has shown some innovation and some willingness to, you know, carve out new interesting areas of the law. But when it comes to tax, they’ve been… Well, they’ve been just very pro-business you could say.

One of the real problems is that in Canada, you know, we don’t even know how much an individual corporation pays in tax when it comes to these multinational companies. They file consolidated financial statements in which they, you know, indicate the amount of tax paid but it’s consolidated for worldwide income.

We don’t know where that tax is paid and on what rate. We don’t know how much is paid in Canada. So we have very little information, which would seem to be relevant. I mean, we’ve been in this exercise for years now in Canada in dramatically reducing the corporate tax rate, cutting it virtually in half, and we’re not allowed, the public isn’t even allowed to even have the most basic information about what kind of tax rates corporations here are paying.

BENGER: If the Supreme Court is the only entity in the country monitoring this are we in trouble?

LINDA McQUAIG One of the problems of course with courts always is that they have this veneer where they’re just deciding things on strictly legal questions. But of course there’s all kinds of political leeway, ideological biases that go into their decisions.The Supreme Court of Canada has, unlike the Tax Court of Canada, which is often quite good, has taken very, I don’t know if you want to say, narrow definitions… It’s basically taken an approach that is extremely beneficial to wealthy interests trying to avoid tax.

It’s hard not to raise the question about whether or not the individuals of the Supreme Court are, move in the same circles or, you know, just generally comfortable with that business milieu and very sympathetic to it.

BENGER: I was struck that the law school at Osgoode Hall is brought to you by Gowlings, the McCarthy Tetreault lecture room. What about the corporatization of academe?

LINDA McQUAIG: I think sadly, of course, what’s missing is a broader understanding of the repercussions of the decisions they make, the enormous social repercussions that if you turn a blind eye to the problem of transfer pricing by corporations, by which they avoid hundreds of millions of dollars if not billions a year collectively in taxes, what do you do then?

Where… how do we make up that money? We make it up either by cutting programs that are of course extremely important. We never seem to cut, deeply cut into things like the police or the fire or the military, but we cut into things like healthcare, care for the elderly, all the kind of social needs that are particularly felt down at the, towards the lower end.

Or you force ordinary mediate income families to pay a lot more in tax. So the ramifications are huge and I think sort of baring it in this sort of very technical language, which of course the Supreme Court does, helps obscure the enormity of the issues at stake.

It’s absolutely significant, I think, what’s been happening in recent years in the academic world, and that is that as we’ve cut back taxes so dramatically on, you know, corporations and high income individuals and, therefore, depleted our revenues, we’ve cut back on public subsidies to our universities.

And universities have made up that shortfall by turning to the corporate sector and they do it unabashedly. The main officials at universities now, president and senior officials are largely fundraisers. That’s mostly what they do.

And so a university like U of T, I think, in recent years has been raising over $100 million a year, which is just astonishing what they’ve been able to raise — but to compensate for that loss of general tax revenue.

Now, on some levels, you know, people think this is wonderful — you know, this seems extremely generous, we see this big donations. But are we so naive to think that these corporations are making these huge payments to universities and expecting nothing in return? Expecting no role in influencing the shape of our universities, the content of what’s being taught?

And I think the answer is of course there’s an influence in that direction. You know, when you see up at Osgoode University, Osgoode Hall, the York University, when you see all the major classrooms and seminar rooms are, have all been paid for by a major law firm, and you also realize that in order to get that money out of those law firms, or course the university is encouraging the law firm to explain what they would like to see in terms of a legal education.

BENGER: What about the idea of cutting deficits, this obedience to cutting and causing disruption in all sorts of lives, more at the bottom than the top and yet this huge pool of capital sits in some form of tax avoidance?

LINDA McQUAIG:A: There’s an enormous connection between the austerity agenda that has been shoved down our throats and the fact that corporate Canada is getting away with all kinds of tax evasion and avoidance. Just a direct connection. It’s in many ways so obvious but it’s so rarely even mentioned. You know, when we, when you look at the kind of cuts that the Harper government has done, I mean, they eliminate things like, you know, the Experimental Lakes Programme, you know, all kinds of enormously important scientific research facilities that are necessary to track global warming.

Obviously they want to eliminate these things in the name of reducing the deficit.

And then there’s all the things that aren’t being constructed that should be. We have an enormous infrastructure deficit in this country. You know, we need to rebuild our highways, our public transit systems, we need to invest in green technology.

I mean, there’s so many things that are desperately needed but instead of investing in those, you know, we, we allow corporations to not pay taxes so then we can argue we don’t have the money to do these things.

We have the situation where Mark Carney, the former Governor of the Bank of Canada, not long ago made the point that Canadian corporations are sitting on something 520 billion in cash that they’re not investing. That money is so, so directly related to the enormous corporate tax cuts we’ve given the corporate world, and those tax cuts were always given in the name of well, if we give them they’ll create jobs. They clearly haven’t used that money to create jobs, they haven’t invested…

They’re sitting on it. They’re sitting on it because there’s not much demand because the incomes of ordinary people aren’t growing. Clearly it would be better if that money were in the hands of government where it could be invested in all the things that Canadians actually need.

BENGER: Last year, Cameron, Hollande and Merkel said that tax avoidance was going to be the number one issue at the G8 Summit in Ireland in June. Six weeks before that, Jim Flaherty made an unpublicized trip to Bermuda where he re-assured Bermuda, the king of Caribbean of offshore tax havens, that Canada had no intention in wavering in its whole-hearted support of the Bermudian economy. At the same time Canada’s supposed to tag along with the G8’s attempts to close these loopholes where multi-billions of tax dollars go offshore.

LINDA McQUAIG: If all the countries got together it would not be very difficult in fact to clamp down on all sorts of things, including the use of tax havens. I mean, if all the countries, if all the major western countries decided, for instance, to require all banks in the world to make reports to governments, you know, of all payments to their clients living in that country, you could do an enormous amount to clamp down on tax havens.

You could put the whole thing pretty much out of business. That’s well within the reach of the major countries in the world to do that because they essentially control the international financial system and it would be quite doable.

The Harper government beats its chest and says, “We’re going to cut down on tax havens by having this snitch line. People can phone in.” I mean, that’s just ludicrous. I mean, that’s like, you know, saying we’re gonna cut down on bank robberies by having a snitch line. If you see a bank robbery going on, phone this snitch line and at the same time they, the Harper government is giving sort of manuals to bank robbers how to open safes or something.

I mean, it just, it… If you want to cut down on tax havens, you must cooperate with other countries. There is a movement that is pushing hard in this direction. We can see in Britain and France and Germany the support, strongly, for this kind of thing. You know, if Canada had any useful role to play on this it could make an enormous difference.

And so what you’re gonna see is of course that, you know, when they get the budget balanced, they’re planning to let rip all these new tax breaks. They’ve already talked about income splitting, which is just really a way to reward high income people that… It offers high income people with a stay at home spouse. It offers no benefit to people lower down the income scale.

I mean, then we’ll go on a kind of tax cutting spree rather than correcting all this suffering and austerity, the fact that, you know, for the majority of Canadians, you know, incomes are stagnant or declining.

That’s true for about 80 per cent of Canadians. Really only in the top 20 per cent, it’s really only in the top 1 per cent that you’re seeing significant growth. And that top 1 per cent is not only not being asked to make a contribution to deficit reduction but has been benefiting significantly from, you know, doing extremely well since the financial crisis.

And that group will benefit even more once the budget is balanced and this, what we can imagine I think to be a cavalcade of new tax things that will be coming down the pipe because of course Stephen Harper has this determination to, you know, eliminate the last tax standing.

Completely indifferent to the notion that taxes pay for, for a civilized country and for the, all the systems and all the benefits and all the social services that are just so utterly important to the lives of millions of Canadians. That just somehow gets left aside.

We’re talking about amounts in the billions to the point that it’s sort of incomprehensible to ordinary Canadians. The number may be tossed out occasionally and, you know, then we move on to the next thing.

But these amounts of money are not just a number of no consequences, it amounts to what we produce in this country collectively and what should be available to us here to in some way invest and enjoy the benefits of together.

And the notion that we just let it kind of scoot through our fingers and there it goes, it’s gone, we forget about it, and let’s get back to policing, you know, the little guy every little tax thing, you better not make a mistake on your tax return or you’ll be in deep trouble.

It’s just astonishing that we aren’t more deeply morally outraged about it.

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