KPMG tax haven scheme shows connection between tax dodging and privatization

“KPMG makes money helping the wealthy avoid taxes and then makes money pushing privatization of public services as a solution to the drop in government revenues caused by tax avoidance.” — Larry Brown, NUPGE president

Ottawa (08 March 2017) — Recently there has been much media coverage about  KPMG's scheme that allows its wealthy clients to avoid paying taxes by moving their money out of Canada and into a tax haven. This scheme generates a significant profit for the company but there's another reason that explains why businesses are so interested in keeping their money out of Canada. 

KPMG’s tax haven scheme on the Isle of Man shows a strong connection between tax dodging and privatization. At the same time that KPMG is telling governments they need to privatize public services when they’re short of funds, it is helping wealthy individuals dodge taxes — thus ensuring governments are short of funds.

Tax dodging and privatization go hand in hand

For KPMG, both privatization of public services and tax dodging are very profitable. When public services are privatized, KPMG has the opportunity to sell its consulting services to the governments privatizing services and the corporations trying to take them over. The fact KPMG was able to charge each person participating in its tax haven scheme a $100,000 start-up fee shows just how much can be made helping the wealthy dodge taxes.

“KPMG makes money helping the wealthy avoid taxes and then makes money pushing privatization of public services as a solution to the drop in government revenues caused by tax avoidance”, said Larry Brown, President of the National Union of Public and General Employees (NUPGE). “It’s great for KPMG’s profits and very bad for the Canadian public.”

Starving governments of funds to encourage privatization is an old trick

There is nothing new about starving governments of funds to encourage privatization. That trick dates back to when conservative ideologues and those profiting from privatization first started pushing for public services to be sold off. As outlined in NUPGE’s "Privatization Playbook" they knew they couldn’t attack public services directly, so they undermined them by starving them of funds.

Cutting tax rates for large corporations and the wealthy was the method of starving public services of funds that received the most attention, but tax dodging has the same effect.

Tax havens cost the Canadian public $80B a year

The use of tax havens to dodge taxes by the wealthy and large corporations is costing the Canadian public $80 billion a year. KPMG’s tax haven scheme is a part of that.

“When we think about the difference that $80 billion a year would make to our health care system, education system, infrastructure and other public services, the damage done by tax dodging becomes clear”, said Brown.

No charges laid against those responsible

It's 5 years after KPMG’s tax haven scheme was uncovered and still no charges have been laid. While the federal government talks tough, KPMG and the wealthy individuals who used its tax haven scheme are still not facing any penalties.

To add insult to injury, KPMG is still getting federal government contracts. It’s estimated that since KPMG started its tax haven scheme, it’s received over $92 million in federal government contracts.

All of the Big 4 accounting firms profit from privatization

While KPMGs activities have received more attention in Canada, all of the Big 4 accounting firms profit from privatization. In addition to KPMG, these are PwC (PricewaterhouseCoopers), Deloitte, and EY (formerly known as Ernst & Young).

All 4 of these companies are involved in privatization as well as tax dodging. One estimate suggests that their tax schemes cost governments around the world $1 trillion (US) a year.

Privatization and tax dodging contribute to income inequality

The Big 4 accounting firms are involved in privatization and tax dodging because these schemes make money for them and their wealthy clients. The price for Canadians is poorer public services, higher user fees, having to pay for expensive private alternatives to public services or increases to regressive taxes. In each case, the impact on the wealthy is minimal and the impact on those with limited means is considerable.

“Both privatization and tax dodging are a cash grab by the wealthy at the expense of the poor and middle class,” said Brown.

NUPGE

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 370,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE

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