The First Ministers will be gathering in Edmonton at the annual meeting of the Council of the Federation on July 17-19, 2017. The issue of who owns our corporations and trusts needs to be a priority on their agenda.
Last year a high profile leak of documents on tax haven use, called the Panama Papers, exposed that many corporations hide the identities of their true owners as ‘beneficial owners.’ By allowing this secrecy of corporate ownership, Canada enables those companies to aggressively avoid and evade taxes. The corporate veil conceals not only money, but also the identity of those hiding it. This means the government cannot track the incomes of those Canadians or their taxes.
Federal Finance Minister, Bill Morneau has declared a commitment at the federal level to shine a public light on these murky corporate finances. However, with only 10 per cent of companies registered federally, it needs a coordinated commitment from the premiers.
The provinces and territories have a lot to lose if this issue is not dealt with, including significant lost provincial revenues. The problem of beneficial ownership secrecy is not small. In 2013, Global Financial Integrity estimated that over 1 trillion dollars in illicit funds crossed borders, while Canadians for Tax Fairness estimates that provincial and federal governments in Canada lose 8 billion dollars a year to tax havens. While the losses to Canadian governments and Canadian citizens are large, the piece of the solution is not expensive.
Other countries have been taking action, establishing public registries and requiring public disclosure of all owners. Canada is now an international laggard. In a recent evaluation by Transparency International, Canada’s legal framework for beneficial ownership was ranked as ‘weak.’
Ensuring that all Canadians pay their fair share of taxes through beneficial ownership transparency was a key item on the agenda in the June 19 meeting of the federal, provincial and territorial Finance Ministers. A group of organizations that includes Canadians for Tax Fairness, Canadian Labour Congress, Publish What You Pay Canada and Transparency International Canada are calling for the First Ministers to make this a priority area for discussion at the July meetings and recognize the need for cross- provincial and federal-provincial collaboration.
In a letter to the First Ministers, these groups have called for them to continue to move forward those discussions on actions to crack down on tax evasion and close loopholes, and ways to work together to develop a national strategy aimed at improving the availability of beneficial ownership information.
It is critical that efforts to centralize corporate information focus on 1) increasing the transparency of the beneficial ownership of corporations and trust in Canada and 2) make that information publicly available.
A centralized public registry of beneficial owners is an important step to ensure Canada fulfills its G7 and G20 commitments and supports global efforts to fight tax evasion and money laundering and would bring Canada into compliance with international norms.