Ontario’s government is asking Ottawa for help with cracking down on corporate tax dodging.
In a letter to federal Finance Minister Jim Flaherty and Revenue Minister Gail Shea, a copy of which was obtained by The Globe and Mail, provincial Finance Minister Charles Sousa cites last year’s finding by the Don Drummond’s commission on the future of public services that Ontario could raise up to $200-million by improving compliance.
Kathleen Wynne’s government is likely to find a receptive audience, since Mr. Flaherty has already signaled that he wants to tighten tax loopholes in next week’s budget. The letter appears aimed mostly at getting him to focus not just on businesses that move their money offshore to reduce their tax burden, but also on schemes that move dollars between Canadian provinces.
Mr. Sousa notes that Mr. Drummond “recommended reducing the ability of corporations to eliminate or decrease payment of provincial corporate income tax by shifting profits and losses across Canada.”
What Mr. Sousa is partly looking for, a source explained, is change to a law that prevents provinces from obtaining information on taxes filed in other provinces, which currently makes it difficult to identify Ontario-based companies exploiting the system by filing elsewhere.
In addition to the shifting of funds outside the province, Mr. Sousa’s letter also notes “the growth of the underground economy,” and suggests Ottawa and Queen’s Park work together to implement related proposals made last year by Mr. Drummond. Those recommendations, which drew from policies implemented in Quebec, included broadening penalties for non-tax compliance, and using “government-authorized sales recording modules in certain sectors.”
In last month’s Speech from the Throne, Ms. Wynne’s government identified improving corporate tax compliance - something that the third-party New Democrats, whose support will be needed to pass this spring's budget, have called for - as one of its goals. But officials concede that, with the Canada Revenue Agency collecting most taxes paid within Ontario, there are limited measures the province can pursue on its own.