Tuesday, October 12, 2021

Much more needs to be done with tax havens

On Oct. 4, the International Consortium of Investigative Journalists (ICIJ) released information from the Pandora Papers, records from 14 companies that help the wealthy use tax havens. The information is a reminder that there is still a lot to do to curb the use of tax havens.
Wealthy Canadians, world leaders on the list of those using tax havens
Among those found to have holdings in tax havens, or through tax havens, are wealthy Canadians and over 300 public officials, including 35 current or former world leaders. According to a CBC report, the Canadians that have been identified through the Pandora Papers include individuals involved in criminal activity and tax dodging, as well as celebrities.
The ICIJ is planning to add information from the Pandora Papers to its Offshore Leaks database that shows who’s behind the offshore companies, foundations and trusts exposed by the Panama Papers, the Offshore Leaks, the Bahamas Leaks and the Paradise Papers investigations. When this information is shared, it’s likely that the names of other Canadians involved in tax havens will emerge.
When use of tax havens is legal, it’s an even bigger problem
Frequently, the use of tax havens by the wealthy to avoid paying their share in taxes is legal. That may be an excuse for the individuals or companies using tax havens, but it raises even bigger questions for governments. When money is desperately needed to get us through the pandemic, to fight climate change and repair public services, why haven’t loopholes that allow the wealthy and large corporations to avoid paying their taxes been closed?
Pandora Papers highlight growing role of U.S. states as tax havens
While we tend to think of places like the Caribbean Islands as tax havens, that’s changing. As the Pandora Papers show, the role of U.S. states as tax havens is growing. Trusts in some U.S. states are an effective way of hiding assets and avoiding taxes. The Pandora Papers found 81 trusts in South Dakota, 37 in Florida, 35 in Delaware, 24 in Texas, and 14 in Nevada.
Talking tough, while doing nothing
While politicians of all stripes have spoken out against the use of tax havens, many small-c conservative politicians have been reluctant to take meaningful action. The fact that we don't have public beneficial ownership registries is a good example of the gap between what small-c conservative politicians say and what they do.
One of the most effective tools for dealing with tax avoidance and money laundering is a public registry of who really owns companies and property (the beneficial owners). To be effective and allow for greater scrutiny, a beneficial ownership registry needs to be public.
The announcement in the 2021 federal budget, that the federal government would support a public beneficial ownership registry, was a major step forward, but it is still not clear if every province will support this move. Given that both the Liberals and Conservatives have opposed making information in beneficial ownership registries public in the past, there are concerns about whether the will is there to make sure the commitment of the 2021 federal budget becomes reality.
As more details from the Pandora Papers become public, where Canadian politicians stand on public registries of beneficial owners will be a test. If politicians are serious about cracking down on tax dodging and money laundering, they will support public beneficial ownership registries.