Tax advisers around the world are touting shell companies in Canada to help mask a client's assets and business dealings. That’s what journalists from the Toronto Star and the CBC found when they delved deeper into material from last year’s Panama Papers leak.
"They're doing what I call snow washing," Toronto tax lawyer Jonathan Garbutt told CBC. "Because you got this entity that's in Canada, banks or other parties in other countries are going to presume that it's legitimate and OK because it's Canadian — pure as the driven snow of the Great White North … they are trying to pretend that it's Canadian when it's really not."
Both federal and provincial leaders have let this happen. Setting up corporations also falls under provincial jurisdiction. And in most provinces, it is easy to set up an anonymous company. Tax dodgers know it and it has contributed to this multi-billion dollar problem.
“Why does anyone need an anonymous company, except to do something sketchy?” says Dennis Howlett, executive director of Canadians for Tax Fairness. “Anonymity and untraceability are two key ingredients when a tax dodger is looking to set up a scheme. We’ve been asking the premiers to deal with this for years – and they have kept their heads in the sand. Our leaders need to work together on this - now."
A centralized, public registry of the beneficial owners of corporations and trusts will require federal and provincial governments to cooperate. Reforming the beneficial ownership registration regime is one of the key measures needed to stop tax haven related tax evasion and fraud and to fight money laundering.
Last year, the federal Finance Committee released a report which laid out some first steps. It recommended that the Canada Revenue Agency take a lead role in ensuring implementation of the recommendations by the Organisation for Economic Co-operation and Development and the Group of Twenty in relation to their Base Erosion and Profit Shifting Project.