Chasing the fiction of the fair shake: Neil Macdonald

This week is a wonderful moment for the average Canadian to consider the fiction of the fair shake, either from the governments that rule us, or from the big corporations which, let’s face it, also rule us.

Super rich buy their way out of tax-dodge trouble while average folks given cookie cutter options

Hundreds of protesters gathered outside Prime Minister David Cameron's residence last month calling for his resignation over his tax dealings that came to light after the Panama Papers revealed his late father ran an offshore fund that avoided paying tax in Britain for 30 years. (Dan Kitwood/Getty Images)

This week is a wonderful moment for the average Canadian to consider the fiction of the fair shake, either from the governments that rule us, or from the big corporations which, let's face it, also rule us.

The names in the so-called Panama Papers were published Monday. In a searchable database, no less.

It's an unheard-of opportunity to examine how rich people avoid taxes that all the regular-paycheque chumps have no choice but to pay.

The people in the database are probably pretty angry about it; some of them, maybe even most of them, acted legally, or at least not illegally, and paid serious money for all those offshore accounts and shell companies and "aggressive tax planning" schemes.

Which of course is exactly the point: If you have enough money, you can rise above the banal rules designed to snare half or more of the average prole's income.

To most of us, tax departments exist as a set of directives, hard as granite.

Our employers withhold income tax for the government at source. And merchants collect sales tax, doing their calculations as instructed by governments, which of course means in a manner most advantageous to government.

Icelandic Prime Minister Sigmundur David Gunnlaugsson fell victim to the Panama Papers after demonstrations helped drive him out of office. (Reuters)

I wrote last week about how new car dealers collect sales taxes on money their customers don't really spend, because governments want tax imposed on the "full sales price" rather than the real sales price, which is the one arrived at after various discounts like "instant rebates" and "customer cash bonuses" are applied. It can cost the buyer hundreds more per transaction.

Used car tax grab

Dozens of readers then wrote to point out another stealthy tax grab: if you buy a used car privately and manage to extract a great bargain, don't think that'll save you any tax.

Ontario's website, for example, advises buyers that they must pay 13 per cent RST (retail sales tax) on the purchase price or "the Canadian Red Book price," whichever is greater.

Bobby Solhi, a tax lawyer at the Toronto firm TaxChambers, explains that "the parties are deemed to have transferred the car at a price that is at least that which is provided in the Canadian Red Book irrespective of other circumstances."

In other words, Ontario doesn't give a hoot what you actually paid; it wants its 13 per cent of some notional price. 

We don't care what you actually paid. Fork it over.

Secret deals 

But back to the Panama Papers.

To realize how gently the truly rich are treated compared to the rest of us, look at the testimony last week from Canada Revenue Agency employees to a House of Commons committee.

The committee was looking into a secret settlement deal offered to wealthy clients of the accounting firm KPMG, which had set up tax dodge entities for them on the Isle of Man. The CRA explicitly called the arrangement a "sham."

A copy of the settlement offer was leaked to CBC, and MPs on the committee wanted to ask questions about it.

Basically, one CRA official told the MPs, such deals are offered because rich people can really put up a legal fight, and the government might lose.

And Stephanie Henderson, CRA's offshore compliance manager, simply refused to answer questions, citing her obligation to protect privacy. (Never mind that it was the CRA itself that asked KPMG's clients to keep the settlement offer secret; it just wouldn't do for the hoi-polloi to realize that some people get to negotiate, rather than obediently follow cookie-cutter rules).

Air Canada backtrack

In fact, she wouldn't deign to confirm that the signature on the offer was even hers: "Although the signature appears to be my signature … I cannot confirm … whether it would be mine or not," she said, waving away any right of elected members of Parliament to such information.

Tax authorities, though, are hardly the only people in positions of wealth or power to take a contemptuous view of the general public's right to know.

Air Canada, which has made a science out of extracting fees and nickel-and-diming travellers with charges for everything from blankets to leg room to ticket changes, produced a remarkable piece of doubletalk over the weekend, even by its standards.

After people took to social media to complain that residents fleeing the Fort McMurray fire were charged premium airfares, Air Canada adjusted prices and refunded charges. (Andrew Vaughan/Canadian Press)

After reports that it had been gouging passengers fleeing Fort McMurray for Edmonton when the rest of the world was trying to help them, the airline issued an indignant response.

"It is not correct that we raised fares in response to this devastating situation," Air Canada said. "In some cases, customers booking last minute on May 3 and 4 on flights from Fort McMurray and Edmonton paid premium fares.

"This was a result of Air Canada's computerized revenue management system, which automatically manages fares."

In other words, yes, we charged them higher prices, but we couldn't help it. We automatically charge as much as we can.

The airline did do some damage control, adjusting prices and refunding charges after angry passengers took to social media, but whoever wrote that communiqué deserves some sort of PR anti-trophy.

The Competition Tribunal recently ordered the real estate board in Toronto to divulge sales prices. (Mark Blinch/Reuters)

And so does the Toronto Real Estate Board, which until now has done its best to keep prices of homes sold in Canada's second-hottest market a proprietary secret.

It's a matter of privacy for buyers and sellers, you see. Oh, and also a great way to keep prices and commissions high, and deny the public vital information on which to base purchase offers.

In the U.S., all such information is transparent and public, accessible online within days of any transaction. But of course the U.S. has, um, competition, and that can cut into profits.

Happily for Toronto homebuyers, the Canadian government has a department whose job it is to ensure some competition exists here, too. The Competition Tribunal actually did its job recently, ordering the real estate board to divulge sales prices.

A small victory. An actual fair shake. A rarity, to be treasured.

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Neil Macdonald is a former foreign correspondent and columnist for CBC News who has also worked in newspapers. He speaks English and French fluently, as well as some Arabic.


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