![]() “That kind of pervasive in the political environment. “It’s become easier in a world where people think taxes are bad,” Duff said. He’s concerned the use of offshore accounts and subsidiaries has become so common that it is eroding the social contract. However, even legal uses of offshore banking have negative consequences, Duff said. In response to being named in the files, RBC has said it has procedures in place to ensure all activity is legal and reports suspected tax evasion to CRA. The Mossack Fonseca files show the Royal Bank of Canada (RBC) (TSX:RY) used the firm hundreds of times to set up shell companies. Today, every major Canadian bank has offices in Barbados and the Cayman Islands, Deneault noted. CRA is now seeking $600 million in taxes owing on income earned through those subsidiaries the assessment continues to proceed through an appeals process.Ĭanadian corporations’ tax havens of choice are Barbados and the Cayman Islands, not Panama.Ĭanadian connections to Caribbean tax havens run deep, Deneault said in the decades following the Second World War, several well-connected Canadian politicians and lawyers helped to set up the laws and structures that enabled the secretive offshore banking system in the former British colonies. Silver Wheaton (TSX:SLW), a Vancouver-based mining streaming company, used a foreign subsidiary structure when it set up subsidiaries in Barbados and the Cayman Islands. ![]() The corporate income tax in Barbados is less than 1%, compared with the 20% to 31% a corporation would pay in combined federal and provincial income tax in Canada, Deneault said.Ĭanada has tax treaties with Barbados and the Cayman Islands designed to prevent companies from being taxed twice. “Typically they’ll do it legally, and they will generally do that with … a subsidiary that performs a financing function. “Any Canadian-based multinational is going to look at its international operations and devise arrangements to minimize tax,” said David Duff, a University of British Columbia law professor who specializes in tax law. Despite political pressure, the CRA has yet to commit to calculate the gap between the total revenue expected compared with the total tax paid, as countries like the United Kingdom do.Ĭanadians use offshore bank accounts, and many Canadian corporations use structures like setting up foreign subsidiaries in a tax haven country like Barbados. In Canada, the government has instructed the Canada Revenue Agency (CRA) to obtain data from the leak for future investigations. ![]() The leak prompted governments around the world to promise immediate action. The 11.5 million documents from the Panamanian law firm Mossack Fonseca revealed the business dealings of some of the world’s most powerful people, including Russian President Vladimir Putin and Iceland’s prime minister – who stepped aside last week in response to the revelations. “Each time we face that kind of revelation, we see the same phenomenon: wealthy people using structures in order to bypass not only the fiscal system but also the legal system.” “We see how easy, how common it is to use tax havens for wealthy individuals and corporations,” said Alain Deneault, author of Canada: A New Tax Haven. The massive Panama Papers data leak shines a light not only on the dirty money being shuffled through tax havens, but also on the legal and common use of offshore accounts to significantly cut tax payments, say Canadian tax haven experts.
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