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Canada A Tax Cheat Leader After Harper

Liberal Finance Minister Found in Latest Tax Haven Leak

by Enid Godtree

SOURCE PressProgress and Statistics Canada
SOURCE PressProgress and Statistics Canada
The leak of data from tax havens continues.
After a major leak of tax haven data in 2013, the International Consortium of Investigative Journalists has released two more troves of tax haven data: the massive Panama Papers and another smaller leak recently from the Bahamas.
The latest leaks are embarrassing in that they continue to expose individual roles that Canadian politicians and banks play in the tax haven industry.  Sadly, they also show just how much the tax haven industry has infected the Canadian political and financial system.  
Canada is a major player in the tax haven system, its banks having played a lead role in founding many of them in the 1920’s to get Western bank dollars away from prying eyes and oversight of governments.
As profiled earlier this year in the National Observer: “Stats Canada documents how much corporate money flows to notorious offshore tax havens. Today this sum is almost $200-billion a year and growing. Moreover, an estimated $8-billion is also lost annually through tax evasion, although this sum could be more than $20-billion.”
Following the money, you find the following sober facts about Corporate Canada’s ‘foreign investment’:  “After the US, Barbados is the second-largest recipient of Canadian foreign investment – with $71-billion in 2014, up from $50-billion in 2010, while the Cayman Islands is ranked fourth, receiving $36-billion. Barbados and the Caymans are high on that list for good reason – they are notorious offshore tax havens.”
When asked by the National Observer why Canada doesn’t have the political will to put an end to the abuse of offshore tax havens, Diane Francis of the Financial Post put it pretty succinctly: “Because the offshore and taxation lobby is the most powerful in this country.”
The signs are everywhere.
While Canada has had a long history supporting tax havens, things got pretty bad under the Conservative Harper government with money flowing into tax havens increasing to $270 Billion a year in 2015, up a staggering $40 Billion from the year before.
Harper was a renowned bag man for helping the rich hide their money in tax havens, away from public services starved for cash.
A 2013 attempt by some European nations to at least pretend to go after tax cheats at the G8 were scuttled by Canada. According to the Financial Times:   "Stephen Harper, Canada’s prime minister, is resisting  – partly on the grounds of tax confidentiality – plans to crack down on aggressive tax avoidance and evasion by requiring the disclosure of the ultimate owner of shell companies."
That same year a CBC analysis of the government found that the government had been super lax on going after tax cheats from the ICIJ leaks and two other big data leaks in 2007 and 2009, when nearly 1,900 Canadian names were given to the Canada Revenue Agency.
P.E.I. Senator Percy Downe - a 10 year crusader again tax evasion on the Canadian senate - accused Conservative Revenue Minister Gail Shea of stonewalling information on how much money Canada loses in overseas tax evasion.  She was also refusing to shell out money for leaks on tax cheaters - something that the US and Germany do frequently. The Conservatives instead cut money from the CRA that was supposed to be used to go after evasion.
Things have turned out OK for the former PM though. He’s now, with no law training mind you, working for law firm Dentons providing advice to their clients on “maximizing value in global markets.” You might remember Dentons as the  Canadian law firm that provided advice to KPMG clients about using tax schemes to hide assets.
This might explain why the CBC reported earlier this year that: “The Harper government forged a partnership [in 2014] with a major Canadian accounting association, formalizing it as an adviser to the Canada Revenue Agency, at the same time as the group sought to fight the CRA in court to shield the files [held by KPMG] of multimillionaires who had stashed money offshore.”
It also might shed some light as to how the KPMG tax dodgers cut a secret deal and got offered full amnesty from prosecution or penalty after they were caught hiding at least $130 million. KPMG also avoided any penalty. 
Things probably aren’t getting any better under the Liberals.  While they’ve pledged an additional $88 million to fight tax evasion in the CRA (and have a committee looking at the KPMG case), the latest leaks show that Liberal Finance Minister (yup, you read that right) Bill Morneau appears as a director of a Bahamian subsidiary of the human resources firm he headed before being elected.
A spokesperson for the Toronto-based firm, Morneau-Shepell, stated the Bahamian subsidiary was not about avoiding taxes, though it’s unclear from their interview in the Toronto Star why they chose to register the company in a tax haven rather than say a Scotiabank branch in Jamaica.
Speaking of Scotiabank, they, along with CIBC and RBC, are shown to have provided services (including a lot of incorporating) to nearly 2,000 offshore corporations since 1990 in the Bahamas.  
RBC, who serviced over 800 companies, told CBC that everything is on the up and up: “We have an extensive due diligence process to ensure we understand who the clients are and the purposes for those accounts. We have policies, controls and teams to ensure we meet legal requirements to prevent and report suspicious transactions.”
Of course that’s a little hard to take seriously when today Conservative Senator Nicole Eaton claimed that she was a director of an offshore corporation for 12 years — without ever knowing about it.
The Tax Information Exchange Agreement (TIEA) between the Bahamas and Canada, signed by the Harper government in 2010 remains in place under the Liberal government.  The TIEA insures that profits from Canadian subsidiaries “booked” in the Bahamas can be repatriated to Canada tax free. As a result, those profits are never taxed.
One can hope for “Sunny ways” on tax avoidance from the Liberals, but with three major Canadian banks and the Liberal finance minister caught up in the latest leaks, it’s possible that real change could be ignored in favour of lip service.
Also, with close to $33 billion in Canadian funds parked in the Bahamas as of the end of 2015 according to Statistics Canada, it’s also possible (though unproven) that some of Liberal’s billionaire backers could have money there or in other tax havens around the globe.

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