Canadians for Tax Fairness says it is estimated that Canada loses at least $7.8 billion in revenues every year because of tax dodging facilitated by tax havens.
Ottawa (23 September 2016) — There is a powerful Bahamian connection in the mess that is Canada's offshore tax haven epidemic, says Canadians for Tax Fairness (CTF). Now, a new leak to the International Consortium of Investigative Journalists and media reports are blowing its cover.
Leak shows Canadian banks helped set up offshore companies
The Toronto Star and the CBC report that 3 of Canada's top banks have enabled the formation of nearly 2,000 offshore companies and private foundations in the Bahamas. Analysts are quick to point out that not every transaction with a tax haven breaks the law. But tax fairness watchdogs have long warned that Canada has a series of tax treaties with some of the most secretive jurisdictions in the world.
"It just doesn’t make sense,” Richard Leblanc, a leading corporate governance expert and professor at Harvard and York universities told the Toronto Star. “Why are there so many companies registered and such a high volume in a jurisdiction that doesn’t have the population base or the economy to support it? That’s a legitimate question.”
Bahamas considered fourth most popular tax haven for Canadians
Dennis Howlett, Executive Director of Canadians for Tax Fairness agrees. "Bahamas is the #4 tax haven for Canadian money, and is a much bigger player for Canada than Panama where the last big tax haven leak originated. Statistics Canada figures show an estimated $32.9 billion was recorded as being "invested" in Bahamas at the end of 2015. This figure just includes officially reported investments and doesn't capture all the money being sent there illegally by private individuals. It is a problem that grows bigger every year."
Canadian money in offshore tax havens reached an all-time high in 2015 — a record breaking $270 billion. It is estimated that Canada loses at least $7.8 billion in revenues every year because of tax dodging faciliatated by tax havens.
Liberal government starting to curb individual use of tax havens but not corporate use
Howlett says that Canada should be working with global partners to end tax haven secrecy and reform international corporate tax laws. The new Liberal government has taken steps to tackle wealthy individuals' use of tax havens to evade taxes but has not done much yet to curb corporate tax haven abuse.
"There is also a problem with bilateral tax information exchange agreements with tax haven countries," said Howlett. "They do more harm than good as they do not really help expose tax cheats but they allow companies to shift profits to tax haven subsidairies and then bring the money back to Canada tax free because "applicable taxes" are deemed to have been paid, even if it means no taxes were payed at all. These agreements with tax havens need to be renegotiated or terminated."
Lawyers and accountants should have a duty to report suspected tax avoidance and evasion
Howlett continues, "We also need Canada to take strong action against the "facilitators" of tax evasion and aggressive tax avoidance, including Canadian banks, accounting and wealth management companies. There are very few legitimate reasons for setting up an offshore company, foundation or trust in a secrecy jurisdiction like the Bahamas. Why are the Canadian banks helping their clients do this unless they have something to hide? The British government has legislated a duty on lawyers and accountants to report suspected avoidance and evasion. Canada should adopt a similar law."
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 360,000 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