Finance

The House of Commons Standing Committee on Finance (FINA) met on November 3, 2025, to study offshore tax havens. Appearing as witnesses were D.T. Cochrane, Senior Economist at the Canadian Labour Congress; Patrick Marley, a tax partner at Osler, Hoskin and Harcourt LLP; Jonathan Farrar, a professor at Wilfrid Laurier University; and Jinyan Li, a professor at Osgoode Hall Law School of York University.

D.T. Cochrane argued that decades of bad economic policies, including those that facilitated tax haven use by the ultra-wealthy and large corporations, have deprived governments of revenue and shifted the tax burden onto working families. He emphasized the need for transparency, specifically public country-by-country reporting (PCBCR), to reveal where corporations claim profits and pay taxes, noting that Australia has already implemented such a measure. He also called for renewed movement on updating the general anti-avoidance rule (GAAR) and for a new tax commission to simplify the system, disagreeing with Patrick Marley's view that tax authorities alone need the information.

Patrick Marley stressed the distinction between tax evasion, which is criminal, and tax avoidance, which is lawful, arguing that many legitimate business structures, such as partnerships used by multinationals, require offshore entities for tax neutrality. He disagreed with the need for public disclosure, stating that tax authorities already have sufficient information through measures like the common reporting standard and tax information exchange agreements, and that making data public could lead to misuse. He recommended simplifying tax rules and improving CRA auditor training to reduce inappropriate assessments, and noted that the Global Minimum Tax Act (pillar two) ensures large Canadian multinationals pay at least 15% in every jurisdiction.

Jonathan Farrar presented research showing that the public perceives aggressive tax avoidance as evasion, and that a lack of punishment for wealthy tax evaders negatively impacts everyday taxpayers' compliance. He found that charges for tax evasion under the Income Tax Act dropped from 2,397 in 2010 to 43 in 2023, with zero reported convictions for offshore tax evasion in a 10-year sample, and that prosecutions are slow, often taking over 2,000 days. He suggested that reducing corporate and personal tax rates could lower incentives for using tax havens, and that the problem may be more about the tax system than enforcement.

Jinyan Li explained that Canadian tax law is limited by its reliance on private law and international law, and that it sometimes encourages tax haven use, for example through the exemption system for active business income earned by foreign subsidiaries. She noted that defining "offshore tax haven" is difficult and that any fix requires balancing economic competitiveness, international relations, and fairness. She recommended a systematic review of the tax system, tightening the exemption system, and crafting rules to ensure income from Canadian-subsidized research and development remains taxable in Canada, while cautioning that public country-by-country reporting could affect Canadian competitiveness.

The committee also heard debate on enforcement, with members questioning the effectiveness of the Canada Revenue Agency (CRA) given declining charges despite increased budgets. Jonathan Farrar and D.T. Cochrane noted that the CRA may lack resources or prioritization for prosecuting large offenders, while Patrick Marley and Jinyan Li defended the agency's work. No procedural motions or votes were recorded during the meeting.