It’s 2017. Why doesn’t Canada have a transparent system for tracking the real owners and beneficiaries of corporations and trusts?
There is no legitimate reason for an anonymous company. But they serve those with devious purpose. Anonymity and untraceability are golden when a tax dodger is looking to set up a scheme. Canada provides both. Need a “dummy” director to sign your papers and lend you their name for a small fee? We do that too.
The global community and Canadian politicians have criticized what goes on in "traditional" tax havens like Barbados, Cayman Islands or Switzerland. But this week, the Toronto Star and the CBC had unsettling news. The tax-dodging industry views Canada as an ideal tax haven. It’s a deserved jab to our reputation and regular taxpayers should be worried about it. Turns out that it is so easy to set up a shell company without officials asking too many questions that the tax dodging crowd is sending lots of business our way. And our lawmakers aren’t doing anything about it.
In some provinces, you need to show more information to get a library card than to register a company. Tax dodgers know it. They – and the tax industry that profits from their insatiable desire to pay less than their fair share - count on that degree of difficulty to deter anyone from tracking their actions.
So now a country with a formerly solid reputation for a well-regulated financial industry is known for “snow washing.” Our Prime Minister, Finance Minister and National Revenue Minister have all criticized the scourge of tax havens saying that they fuel an existing sense of injustice and inequality. They’ve insisted they’re on the case. The reality is they are still trying to catch up with deeds already committed. It is time to lay down some rules to stop the tax dodging in the first place.
Canada’s premiers need to step up too. Provincial budgets would benefit from a crackdown on tax dodging that costs us at least $8 billion a year. Instead of diverting that money to secret accounts of the very rich, those revenues could strengthen front line services like health care, community supports, and education. Sadly, most provinces seem fine with the status quo – letting the very wealthy avoid their responsibility and leaving the rest of us to live with the consequences.
It is time for our tax system to reflect the realities of 21st century tax-dodging. A good place to start would be a centralized, public registry of the legal and beneficial owners of corporations and trusts as the UK is now implementing. What is in place now is time-consuming, costly and unwieldy. The current incorporation and registration system has the federal and provincial governments maintaining separate corporate registries. Not all provinces require the same information. Tax dodgers and their advisors count on that degree of difficulty and hope it deters anyone from tracking them down. It’s been working for them far too well.
It isn’t just about tax revenues either. The UN office on Drugs and Crime estimates at least $800 billion is laundered each year. Anonymous corporations grease that process. And when the World Bank studied 200 cases of grand corruption, they found that 70 percent involved the use of shell companies. Is that something Canada wants to aid and abet?
Creating a Canadian public registry of the legal and beneficial owners of corporations and trust would enable the tracking of illegal money. It would make it easier for financial institutions, securities commissions and law enforcement officials to track the true beneficiaries of companies and trusts. It is an important contribution to making it more difficult and less attractive for people to benefit from the proceeds of crime.
It can be done. A research paper by the Canadian Association of Financial Officers found multiple examples of effective registries including one in Great Britain. It also points out creating a public registry system would be a necessary step to uphold Canada’s global commitments and its responsibility to create a fair tax system here at home.
In his letter to Cabinet, Prime Minister Trudeau committed to openness and transparency and said that “government and its information should be open by default.” Requiring corporations to register beneficial ownership and making that registry available to the public would be an active example of that commitment.