Originally published by Canadians for Tax Fairness here

Corporate tax haven abuse is still a significant problem for Canada. Unfortunately, it is difficult to estimate the true scale of the problem because, unlike the European Union and Australia, Canada does not require multinational corporations to publicly disclose where they book their profits. For the few multinationals that operate in Canada and have publicly available data, this report estimates the scale of their profit shifting into or out of Canada and tax havens.

There is a significant mismatch between the share of profits that transparent multinationals report in Canada and the share of employees and tangible assets they report in Canada. We estimate that just 26 multinational corporations have shifted $45B of profits out of Canada and $89B into tax havens since 2018. Had these corporations recorded their profits in Canada in accordance with their real economic activity, Canada could have raised an additional $12B in corporate income tax revenue.

We provide a detailed look at the transparent tax reports of Rio Tinto, Maersk, Randstad, Adecco, and Anglo American — five multinational corporations which operate in Canada and span the mining, shipping, and professional services industries. Each of them reports far more profits in tax haven jurisdictions than is expected based on where their employees and tangible assets are located. Rio Tinto reported 26% of its employees in Canada but only 8% of its profits. Maersk shifted nearly $3B in profits to each of Singapore and Hong Kong, where it pays tax rates of 0.4% and 1.2%, respectively. Randstad shifted nearly $3.6B in profits to Singapore, Switzerland and Luxembourg, three tax havens where it pays an effective tax rate less than 10%.

This evidence makes it clear that multinationals that operate in Canada are still able to choose where to book their profits strategically to minimize their tax obligations instead of paying taxes where they actually operate. To truly tackle this problem, Canada must modernize its transparency laws so that the public can understand the full scale of the corporate tax abuse of multinational corporations.

As Canada looks to strengthen its ties with the world outside of the United States, taking action on corporate tax transparency presents an opportunity for multilateral cooperation. By matching Australia’s landmark transparency legislation and fully supporting the democratic United Nations Tax Convention process, Canada can be a leader on the world stage.

The OECD/G20 process to combat corporate tax abuse has failed — it resulted in Canada’s implementation of a global minimum corporate tax that has not meaningfully changed corporate behaviour. A fair, transparent and standard formula to allocate profits across countries is sorely needed. This would raise billions in public revenue and restore public faith in Canada’s tax system.