You can set your watch to it: A government creates a benefit to help workers, and it’s followed swiftly by a sweep of over-the-top allegations about people “fraudulently” claiming said benefit. So, when the Canada Emergency Response Benefit (CERB) was announced at the outset of the COVID-19 pandemic, it was only a matter of time before vague allegations of mass “CERB fraud” surfaced.
These claims really picked up steam this week, with the National Post reporting that “200,000 applications have already been ‘red-flagged’ as possibly fraudulent.” This led to questions at Prime Minister Justin Trudeau’s daily press conferences on the matter, which generated stories about the federal government “ducking questions” about CERB fraud. The hysteria reached a fever pitch toward the end of the week, with Aaron Wudrick, federal director of the right-wing Canadian Taxpayers Federation, suggesting people have been using their horses identities to claim the CERB (you do keep a horse for just such opportunities, don’t you?).
And the evidence for these claims? The National Post’s reporting was based on information apparently provided by an unnamed source “familiar with the situation,” — though the reported data was contradicted by the Federal Employment Minister — and Wudrick’s source was “an email from someone […] who knows an individual who owns horses.”
In other words, it’s all a bit of a joke. There’s zero evidence so far that people who don’t meet the CERB’s somewhat confusing eligibility rules are fraudulently claiming the benefit. But that’s how these things work: whip up a moral panic about welfare cheats based on a story someone heard from a friend who knows a guy. The point is not to uncover actual problems, but to demonize welfare recipients generally as cheaters, liars and probably criminals to boot.
Well, I’ve heard some stories about fraud too, and my sources aren’t a friend of a friend’s uncle — they’re the Canada Revenue Agency and the Parliamentary Budget Office (PBO). And from what they’ve said, I’ve concluded the real liars and cheats are large corporations and personally wealthy individuals who dodge billions of dollars in taxes each year through a range of mechanisms ranging from the unethical to the illegal.
A 2019 CRA report — the first of its kind — found that Canadian corporations evaded between $9.4 billion and $11.4 billion in taxes in 2014 through schemes that are either illegal or exist in a grey area, such as the use of complex corporate structures exploiting offshore accounts. Earlier CRA reports found $4.9 billion was lost to GST/HST tax fraud, and individual offshore tax evasion — something accessible mainly to rich people with expensive accountants — cost up to $3 billion.
Another 2019 report by the PBO looked at tax and bank data between 2016 and 2018 and found that nearly $1 trillion flowed from Canadian corporations into offshore tax havens such as Bermuda and the Cayman Islands. This is all probably legal under our current rules — tax “avoidance” rather than the criminal “evasion — but the PBO estimated that it costs Canadians $25 billion in lost corporate tax each year.
There’s also dozens of loopholes and special vehicles built into our tax code that disproportionately benefit the rich. For example, the ability to deduct “business meals” and entertainment expenses for corporations costs us $500 million per year. Those with private corporations pay a lower tax rate on passive investment income up to $50,000 per year pulled from their corporation, costing $100 million per year. The stock option deduction allows those compensated with large stock option packages (usually corporate executives) to pay half the tax rate the rest of us pay on employment income, costing $1 billion per year. The Canadian Centre for Policy Alternatives estimates these sort of loopholes cost up to $18 billion per year.
If you’re keeping score at home, that’s a total of $62.3 billion lost each year to tax evasion, avoidance and loopholes. It’s documented by exhaustive studies and reports conducted by reputable institutions based on tax and financial data. It’s been happening for decades.
That sum is almost twice the cost of the entire CERB program, which is projected to be $35.4 billion. Yet the focus of the country’s political and media elite is fixed squarely on “CERB fraud,” a phenomena which hasn’t been proven to exist, and in any case certainly doesn’t approach the scale of the fraud committed on a regular basis by the wealthy.
The reason for this is straightforward enough. To paraphrase Richard Nixon: if the rich do it, it’s not a crime. The wealthy have an interest in maintaining their ability to avoid paying taxes whenever possible, and they dispatch their allies in politics and the media to protect this interest. One proven way of doing this is by directing energy and ire toward largely fictitious “welfare cheats.” Often this means painting welfare recipients — some of the most marginalized and destitute people in our society — as living large off the public dime. It’s always been a lie, but in the context of a pandemic in which people cannot work, it’s even less believable than usual.
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