Editorial: Tax fairness needs to be a priority for Ottawa

Government data suggests there may be tax shenanigans going on in the city of Richmond, a situation that clearly is intolerable.

Questions have been raised by a recent Vancouver Sun report by Douglas Todd about residents in the upscale neighbourhood of Thompson, located in northwest Richmond.

Former Richmond mayor Greg Halsey-Brandt says some people in the area, many of them emigrants from China, are under-reporting global incomes, and not paying a fair share of taxes for the social and other services they use.

It is not difficult to believe his suggestion when 26.2 per cent of Thompson residents are reporting incomes at near-poverty levels, according to Statistics Canada, even as they buy and live in mansions valued at $1 million or more.

Halsey-Brant says the problem of under-reported income in Richmond is not restricted to Thompson.

The federally funded Race Relations Foundation is so concerned about the issue it is urging the Canada Revenue Agency to more closely scrutinize immigrant earnings.

Part of the problem derives from a legal determination of newcomers as either residents of Canada for income tax purposes, or non-residents for tax purposes. (Only the former qualify for the federal capital gains exemption on sale of a principal residence.)

Non-residents for tax purposes who live here cannot avoid paying sales and property taxes but their income tax would be payable elsewhere.

David Duff, co-director of the National Centre for Business Law at UBC, suggests Ottawa could start designating home ownership or family members’ residency as criteria for the fully taxable designation.

All those who are residents for tax purposes are expected to pay tax on worldwide income but only on amounts they directly receive, not on income received by an offshore corporation or trust they may hold. Until recently, such entities held by new immigrants were exempt from taxation for a five-year period.

Canada and China have since 1986 had a tax agreement enabling the sharing of tax information; Canada and Hong Kong struck a similar treaty in 2012. But, unfortunately, neither jurisdiction engages in automatic information exchanges on this front the way Canada and 60 other countries do.

The federal government reiterated recently it has zero tolerance for tax scofflaws and it has taken several steps to address nonpayment of tax.

The government has ended the aforementioned five-year tax holiday on income from trusts, for example. It now requires financial agencies to report electronic fund transfers in excess of $10,000 to the CRA, and last year it established an offshore tax informant program.

To ensure newcomers are not resented and the fairness of Canada’s tax system, this must continue to be a high-priority area for federal action.