As global leaders gather at the World Economic Forum in Davos, Switzerland, calls are growing to tax what some call the “ultra-rich” — but how feasible is that in Canada?
A new report released by Oxfam International on Monday suggests that the world’s richest one per cent have amassed almost twice as much new wealth – a whopping US$26 trillion – as the other 99 per cent of the world’s population over the past two years.
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This report says that during the COVID-19 pandemic, the wealth of billionaires has grown by US$2.7 billion per day, while at least 1.7 billion workers live in countries where inflation is outpacing their wages and above 820 million people are starving.
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“Wealth inequality is out of control and at levels we haven’t seen before, and we’re starting to see an increase in poverty for the first time in 25 years,” said Ian Thomson, policy manager at Oxfam Canada in Ottawa.
Oxfam’s report comes as the World Economic Forum, an annual gathering of political and business leaders, takes place in Davos.
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To narrow the ever-widening gap between rich and poor, Oxfam is calling on governments to introduce a range of tax policies aimed at the rich.
These include one-off “solidarity” wealth and tax windfalls, as well as permanent tax increases on the richest one percent.
And now some millionaires, including wealthy Canadians, are joining the calls for higher taxes.
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In an open letter published Wednesday to political leaders in Davos, a group of more than 200 millionaires from 13 countries said: “Tax the ultra-rich and do it now. It’s simple, common sense economics. It’s an investment in our common good and a better future that we all deserve, and as millionaires we want to make that investment.”
Claire Trottier, a philanthropist and tax justice advocate from Montreal, is among the five Canadians who signed the letter.
She said taxing the rich would not only tackle growing inequality, but also generate much-needed revenue to tackle the major problems facing the world at the moment.
“There is no single solution, but certainly wealth taxes to me are an absolutely essential and necessary part of the solution,” Trottier told Global News.
In an Ipsos poll conducted last year, an overwhelming majority of Canadians (80 per cent) said governments should tax the rich more.
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The federal government is looking at ways to do this and ensure tax fairness, but critics in favor of more taxes on top earners say more needs to be done, including imposing a wealth tax, an inheritance tax, a windfall tax profits of corporations, as well as closing any tax loopholes in the country as part of some of the solutions.
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The Liberal government’s 2022 budget includes a proposed 1.5 percent additional tax on bank profits above $100 million, as well as a one-time 15 percent levy on income above $1 billion for the 2021 tax year.
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The luxury goods tax, which went into effect last September, covers cars and SUVs, as well as private jets and helicopters worth more than $100,000. The federal tax will also cover yachts and boats, including powerboats, valued at more than $250,000.
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These are all “baby steps,” Thomson said.
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“The Liberal government has been saying for many years that they want to address excessive wealth inequality, but we haven’t seen them put those words into action,” he said.
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The New Democratic Party is pressuring liberals to do more to tax the super-rich. With the party now in a governing agreement until 2025 with the federal Liberals, who hold a minority government, it’s unclear whether the NDP will use that influence to further those goals.
“It’s disappointing to see the federal government refuse to take progressive action to ensure the wealthiest pay their fair share of taxes,” said Nicky Ashton, the NDP’s tax fairness critic.
“We must close the tax loopholes that allow our country’s wealthiest to hide and avoid paying their taxes,” she added.
Why do the rich keep getting richer?
According to Oxfam’s analysis, 95 food and energy corporations doubled their profits last year, generating US$306 billion in windfall profits.
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In Canada, the highest-paid CEOs and other top executives broke a record for compensation in 2021, earning an average of $14.3 million, according to a Canadian Center for Policy Alternatives report released earlier this month.
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Oxfam Canada’s Thomson said the response to the COVID-19 pandemic and the economic crisis that followed has helped increase the wealth of the richest.
He said pumping public money to prop up economies and meet people’s basic needs had indeed boosted corporate profits over the past two years.
“The response to the pandemic was necessary, but what it has led to is this concentration of wealth at the top,” he told Global News.
That’s why Oxfam and others are calling for a sudden tax on corporations that have seen excess profits. Oxfam also wants the idea to go further to include big food corporations as a way to narrow the widening gap between rich and poor.
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Some governments have moved to tax windfall profits for fossil fuel companies as Russia’s war in Ukraine sent oil and natural gas prices soaring last year.
Canada has yet to join, with the federal government saying it has no plans to impose a tax on windfall profits posted by Canadian energy companies.
“Snow washing” in Canada
Tax avoidance and evasion also exacerbates the problem of inequality, as the rich can move their money around and take advantage of the legal system to pay less tax, experts say.
A 2017 joint investigative report by the Toronto Star and CBC, titled “Snow Washing,” revealed how wealthy people around the world set up shell companies in Canada to hide their money.
Mark Tasse, a forensic accountant and professor at the University of Ottawa, said Canada is an “attractive” opportunity for corrupt individuals because it is easy to set up a company without providing much information in the country.
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“You can set up a company in Canada in about 15 minutes, so it’s practically easier to set up a company in Canada than it is to get a library card,” he told Global News.
To tackle the problem, there must be “political will”, but the problem cannot be solved overnight, Tasse said.
“I think we need to review our laws, give more power to regulatory agencies and also to law enforcement officers,” he said.
“We must work hand in hand with our international partners.”
— with files from The Associated Press and The Canadian Press
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