Canadian $$ in Tax Havens Reach $199 Billion

We've done the math and the news isn't good.

Assets officially held by Canadian corporations in the top ten havens reached $199 billion dollars last year. This is up from $187 billion in 2013. It is a stark and expensive reminder that Canadian corporations are continuing to shelter funds offshore while the government does little to curb the practice.

Prime destinations for the money are Barbados ($71B) and Cayman Islands ($36B) – two notorious tax havens that have been a consistent destination for Canadians seeking to avoid paying taxes. In the one year period between 2013-2014, Canadians funnelled $8B to those two havens alone.

Canadian corporations' assets held in Switzerland jumped to more than $11B – tripling what it was in 2012. Canadian tax haven users removed more than $5billion from Luxembourg during the same period. One reason could be the highly publicized leak of secret tax deals between major corporations and that country.

“While a small portion of the money in tax havens may be legitimate investments, such as in resorts or operating businesses, most of it is there to avoid paying taxes back home in Canada,” says Dennis Howlett, Executive Director of Canadians for Tax Fairness. “Walk down a street in Cayman Islands and you will see very little evidence of $36Billion in Canadian investment. But what you will see are small buildings with hundreds of mail boxes that are head office to more than 18,000 shell companies – most of them subsidiaries of corporations trying to avoid tax. The same scenario plays itself out in Luxembourg and other tax havens." 

Our calculations are based on Statistics Canada’s Foreign Direct Investment data. They include funds "officially" reported by Canadian corporations in these countries. They don’t account for funds held in tax havens by individual Canadians though foreign-owned corporations. Nor do they include assets not reported in tax havens, which are notoriously secretive. More than half of the money is channeled abroad by Canadian banks and financial institutions who play a key role in facilitating tax avoidance.

Canada loses at an estimated least $7.8B+ in revenue each year from tax haven use. Cuts to programs and staffing at the Canada Revenue Agency have resulted in reduced capacity to investigate the growing problem of tax haven usage.

Along with the Global Alliance for Tax Justice, Canadians for Tax Fairness is calling for several key measures to tackle tax havens: 

  • Automatic exchange of tax information with other countries 
  • A withholding tax of 1 per cent of all money sheltered in recognized tax havens.
  • Implementing a Tax Gap study as outlined by the Parliamentary Budget Office to clarify how much tax revenue Canadians are losing as a result of tax haven schemes  
  • Investing in more auditors for the Canada Revenue Agency and giving higher priority to countering aggressive tax planning practices.

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Top Ten Tax Havens Table