Focus: The case for tax justice as a whistleblower protection issue

Abstract

With the revelations of the Panama Papers and Paradise Papers, tax justice has become a hot topic for governments, media and NGOs. Trade unionists should use this emerging issue as an opportunity to remind governments of the impact tax exploitation has on the average workers; the integral role workers, especially in the judiciary, tax, and customs sectors, play in exposing tax exploitation; and the way in which this is inextricably tied to the need for improved whistleblower protections. Tax exploitation, including evasion and avoidance, increases the tax burden on average citizens, exacerbates income inequality and erodes resources needed to fund essential public services and fight poverty. When large multinational organisations and the ultra-rich use complex tax avoidance schemes or techniques such as tax loopholes and shell corporations to avoid paying their fair share of taxes, they are doing so at the expense of the average worker. This is no longer a surprise for anybody but it is unusual that those harmed by these practices (99 percent of the population) do not actively react to the way in which these practices undermine basic public services and reduce the resources available for public policies. Tax exploitation drains the pool of resources governments draw on to fund public services such as transit, infrastructure, highways, schools and healthcare. Tax abusers take advantage of public services without contributing back their fare share, eroding the quality and accessibility of these services. The burden for supporting public services is then shifted to the shoulders of the average worker. The vital role of whistleblowers Tax justice is also tied to another emerging labour issue: whistleblower protection. Due to their position within institutions, workers, specifically those in the judiciary, tax, and customs sectors, are uniquely placed to uncover and expose tax abuses, fraud and corruption. In fact, a recent Global Fraud Report found that whistleblowers were the single most effective way to uncover fraud. In 32 percent of cases where fraud was uncovered, an employee had blown the whistle to provide information that facilitated an investigation. In cases where a senior or middle manager was implicated, that number increased to 41 percent . Workers are on the frontline for uncovering tax exploitation, fraud and corruption. But coming forward to expose wrongdoing can come at a cost. Whistleblowers can suffer professional reprisals including demotion or dismissal, as well as isolation, character defamation, imposition of hardship or disgrace, exclusion and harassment in their workplace. Workers’ fear of these consequences and their fear that they will not be protected by existing legislation can have a significant chilling effect on their willingness to expose wrongdoing. In fact, research has shown that fear of reprisal is the number one deterrent to workers blowing the whistle. Unfortunately, this fear is well-founded: a recent survey of over 10,000 workers in the public, private and non-for-profit sectors across 13 countries found that 36 percent of workers who observed and then reported misconduct suffered formal retaliation. An example of the direct tie between tax justice and the need for strong whistleblower protections can be found in the recent issues surrounding the Canada Revenue Agency, the federal agency that administers tax laws for the Government of Canada. Starting in 2013, the government implemented sweeping austerity measures including a $250million budget cut to the Canada Revenue Agency over four years, resulting in a massive loss of capacity and institutional knowledge. The connection between austerity and declining tax revenue couldn’t be more clear: austerity begets cuts, which emboldens tax evaders, which leads to more cuts. Around the same time, employees disclosed to the tax justice organisation Canadians for Tax Fairness that they were aware of corporate and political lobbying at the higher levels of the CRA and of an unofficial quota of cases they were expected to resolve. The combined result of these two factors was that employees were encouraged to target simpler, less time-consuming cases and to avoid complex investigations into large-scale tax fraud. Some CRA employees were concerned about the pressure on employees to move away from largescale , high-profile investigations. However, out of fear for their position, they were only able to disclose their concerns to Canadians For Tax Fairness under...