Todd covers the views of David Lesperance, a tax and immigration lawyer, on how best to ensure that ‘astronauts’ contribute their fair share in income taxes (they pay property tax and GST).
Although I agree on the need for measures to curb the abuse and “free-loading”, his ideas do not strike me as particularly realistic in terms of implementation if they are not resident in Canada:
It’s clear astronaut families have brought cultural diversity, international connections and foreign currency to Canada: They’ve fuelled not only real estate development, but also automobile sales and private schools.
While many astronaut families exhibit as much integrity as others, some taxation and immigration specialists believe Canada needs new ways to counter the downsides of circular migrants — particularly unaffordable housing and uncollected taxes.
An anti-corruption agency, Transparency International, recently released a report calling Metro Vancouver one of the hot spots for a globalized “corrupt elite” intent on making their dirty wealth look clean by laundering it through real estate; exploiting gaping tax loopholes.
What can be done? The short answer is better taxation and immigration policy — and rigorous enforcement.
David Lesperance, a tax and immigration lawyer with offices in Toronto and Europe, has striking ideas for reform.
They would bring fewer “ghost immigrants” to Canada, he said, and more of what he calls “Golden Geese,” well-off migrants who intend to pay their fair share of taxes.
“The problem is there is large-scale immigration of relatively wealthy people to Canada who are not contributing significantly, if at all, to the Canadian tax base,” says Lesperance.
“They have bid up the local housing market in Vancouver and Toronto. In addition, they are receiving the benefits of Canadian permanent residence, such as cheap and excellent schooling, free medical care and security.”
Unfortunately, Lesperance says, Canada is not obtaining its full measure of property or income taxes from these newcomers. There is both a real and perceived lack of enforcement of Canada’s tax laws.
“Theoretically, each of these wealthy immigrants should be paying Canadian tax on their worldwide income and capital gains. But the reality is the Canada Revenue Agency has not been enforcing this regime and this news has spread through the immigrant community,” Lesperance says.
“Astronaut families are those who were granted permanent residence status for their families and, after buying homes and installing children in schools, the principal breadwinner then tries to claim no Canadian tax liability — often by relinquishing their immigration status (or by) claiming they’re non-residents of Canada for tax purposes.”
To change the global perception that it’s easy to get away with not paying taxes in Canada, Lesperance says there is a need for well-publicized tax audits of such “ghost” immigrants.
It wouldn’t be hard to catch cheaters, said Lesperance.
The first group to audit, Lesperance said, is the 40,000 would-be immigrants who have, in the past two years, renounced their permanent residence status in Canada, often to avoid taxes.
Renouncers and others should be subjected to “lifestyle audits,” Lesperance said. Tax auditors should dig into whether astronaut fathers, but also their spouses and children, continue to own Canadian properties and spend lavishly on cars and private schools.
Those who are caught evading taxes should be publicly exposed, he said.
“The impact of news of such an effort will resonate like a thunderbolt within the immigrant communities. The fallout will be that each family will have to determine whether (staying in Canada) is valuable enough for them to pay the proper (taxes).”
Lesperance offers another idea, which is more unorthodox.
There is nothing wrong with creative rich people travelling the world to work, invest and run businesses, argues Lesperance. Many are his clients, whom he calls the “Golden Geese.”
They would be satisfied, he says, holding two passports while still paying their share of income taxes to Canada, in return for “a stable and safe place for their global operations.”
Canada is losing out on these entrepreneurial newcomers, he says, because its “antiquated” immigration policy focuses on migrants proving a sustained “physical presence” in the country.
Lesperance turns things around by suggesting we not worry so much about whether such wealthy would-be immigrants are physically present in Canada.
Instead, Lesperance recommends rating them on whether they pay significant income taxes in Canada — regardless of which country they spend most of their time in.
It’s a counter-intuitive way to think about immigration policy, which has traditionally expected newcomers to show a physical loyalty to their new land. I’m not saying I necessarily endorse it. There are other ways to tax the properties of astronaut families.
But at least a new “tax-residence” approach to business immigrants would help Canada become less of a haven for those circular migrants who are determined to avoid or evade taxes the rest of us are expected to pay.
Multicultural Meanderings 