Making tax evasion easy also helps crooks and terrorists

“Protecting the safety and well-being of Canadians should come ahead of enabling well-heeled individuals and companies to avoid paying their share of the tax bill." — Larry Brown, NUPGE President

Ottawa (10 Jan. 2017) – For some time, corporations and wealthy individuals trying to avoid paying their share in taxes have found it easy to hide their money because information on who really owns companies registered in Canada can be kept a secret. Now a study by Transparency International has found that secrecy around who really owns corporations means Canada is in danger of becoming a haven for those trying to hide illegally obtained money, including criminals and terrorists.

“When governments claim they can’t afford to adequately fund public services, weak regulations that make it easy for the wealthy to avoid paying their share make no sense. But when those weak regulations also help criminals laundering money and terrorists, federal and provincial governments have no excuse not to act,” said Larry Brown, President of the National Union of Public and General Employees (NUPGE).

Need to end secrecy around beneficial ownership

A key weakness in the rules for registering corporations in Canada is that there is no requirement to disclose who really controls a company. This is known as beneficial ownership. This makes it easy to set up shell companies that allow the real owners to remain secret while having access to bank accounts and the ability to use their funds in the legal economy.

People registering corporations are not even required to provide identification, and there is no verification process. As Transparency International put it, “In Canada, more rigorous identity checks are done for individuals getting library cards than for those setting up companies.”

Canada falling behind, while other countries tighten rules

As part of the G20, Canada agreed to 10 principles intended to end the secrecy around beneficial ownership. The federal government has taken very little action. The Transparency International report rates Canada as very weak, or weak, on 7 of the 10 principles, and very weak overall.

In contrast, other jurisdictions are taking seriously the risks that come with keeping beneficial ownership secret. The European Union is proposing a public registry that would show beneficial ownership, so that law enforcement agencies, journalists and others could see who really controls companies.

If Canada’s rules remain weak, Transparency International believes we will become a haven for some very unsavoury groups and individuals.

Secrecy around ownership makes money laundering easy

Transparency International also reported that secrecy around beneficial ownership is why it is so easy to get away with money laundering in Canada. While the amounts involved in money laundering are in the billions, only 6 per cent of cases the police investigate result in a conviction.

In 82 per cent of money laundering cases the police aren’t even able to figure out the identity of those involved. Of those where the police can identify a suspect, the conviction rate is one-third.

Public registry needed to reveal beneficial ownership

The National Union supports work to end the secrecy around beneficial ownership.  "While requiring beneficial ownership to be disclosed doesn’t eliminate the problem of shell companies being used for tax dodging, money laundering, or financing terrorism,  a public registry will make it a lot easier to detect those uses," said Brown.

As long as beneficial ownership remains secret, Canada will lose billions in tax revenue that could be supporting vital public services. Criminals and terrorists will be able to move illegal money with ease. Those reasons alone should outweigh the fact that some well-connected individuals won’t be quite as wealthy.

“Protecting the safety and well-being of Canadians should come ahead of enabling well-heeled individuals and companies avoid paying their share of the tax bill,” 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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