Fifteen billion dollars. That’s how much the federal government loses each year to tax haven abuse by big corporations and the ultra-wealthy. At a time when the Carney government is planning deep cuts in federal spending, that number is staggering.
It becomes even more shocking when you consider that, for decades, civil society organizations and members of every major federal political party have called for closing tax loopholes and cracking down on tax havens—policies that enjoy overwhelming public support.
If $15 billion is sitting on the table for a cash-strapped federal government, and Canadians broadly agree it should be recovered, why hasn’t it been?
When most people learn about tax havens for the first time, they often assume that the lost revenue resulting from their use must be the outcome of an elaborate game of cat and mouse between the government and tax dodgers.
Whether we are likely to think the government is hapless or not, Canadians tend to assume lawmakers are doing everything they can to ensure that mega-corporations pay their taxes. We also imagine that, unfortunately for us, these corporations’ clever, expensive, tax planners are always a step ahead of the government, regularly finding new and innovative ways to legally avoid taxes, just as the government thinks it has them cornered.
The reality is very different, and much simpler.
The problem we think we have—and the problem we actually have
Ottawa is well aware of the revenue it loses to tax havens. Governments of all political stripes have known this for decades, and opposition politicians from multiple parties have been sounding the alarm for just as long. Despite all of this intimate knowledge of the problem, successive governments have actually made it easier, rather than harder, for corporations to avoid taxes via tax havens.
Let’s start with the basics. Tax havens are jurisdictions that provide various benefits to the very wealthy and large corporations, typically in the form of low corporate tax rates, low capital gains tax rates, or the ability to set up companies secretly.
In 2024, corporate Canada and the ultra-rich had $682 billion in assets stashed in 15 tax haven jurisdictions worldwide. That marks a 165 per cent increase from just ten years ago.
To grasp the scale of $682 billion, picture the combined value of every crane, tractor, transport truck, forklift, and MRI machine in Canada. Now imagine all of that value stripped from the Canadian economy and parked in just 15 small countries and territories, with a combined population of about 50 million.
The scale of the problem becomes even clearer when we consider that, outside the United States, Canadian individuals and corporations hold a total of $501 billion in assets across the rest of the world.
Clearly, wealthy Canadians and large corporations are disproportionately recording their assets in tax havens. The half a trillion dollar question is: Why are the ultra-wealthy and large corporations moving their assets to these small jurisdictions? And how did the Canadian government play a role in letting it happen?
For the most part, assets are moved to tax havens in order to take advantage of one key feature in Canada’s Income Tax Act. Foreign subsidiaries of Canadian corporations are legally allowed to return profits to Canada tax-free, as long as Canada has a comprehensive tax treaty with the country where the subsidiary is based.
At first glance, with many countries, this makes sense. The United Kingdom, for example, has a corporate income tax rate of 25 per cent, which is very close to Canada’s (the rates vary across provinces, but in Ontario, for instance, it’s 26.5 per cent). So, if a British subsidiary returns profits to a Canadian parent company, it would have already paid taxes on those profits at a rate very similar to what they would have paid in Canada.
But for some countries, the corporate tax rates are not close—not by a long shot. In those cases, over the past several decades Canadian lawmakers have created and reinforced perverse incentives.
Decades of sounding the alarm
In December of 1980, the House of Commons debated Bill S-2, which would ratify a series of tax treaties with trading partners including Barbados—a small economy with a population of just 250,000 at the time. Bob Rae, who was then the NDP’s finance critic, rose during the debate to issue a warning.
“The government is entering into these tax treaties without being fully aware of the impact they will have on domestic taxation in Canada,” he said. “Money that is income and is not being taxed at the corporate level, on which the government receives no revenue, has the unfortunate effect of increasing the load of taxation on the average citizen.”
From that point until 2024, foreign corporations in Barbados were subject to corporate tax rates between one and 2.5 percent. Despite this low rate, a Barbados-based subsidiary could return profits to its Canadian parent company tax-free, creating a strong incentive for Canadian corporations to route profits through Barbados. Today, Canada’s large corporations and wealthy elite continue to exploit this, with $120.6 billion held in Barbadian assets in 2024.
Concerns about tax treaties and havens didn’t end in the 1980s. In 1992, Auditor General Denis Desautels warned the Mulroney government that the system was failing.
“The system was intended to ensure that income entering Canada would be taxed by Canada if it had not been previously taxed by a foreign state at a rate that approximated Canadian rates,” he wrote. “This is not what is happening in many situations… The Department of National Revenue… is aware of a number of taxpayers who have used this scheme to be in a position to move $500 million into Canada tax free.”
The warning went unheeded. Desautels later joined the board of Bombardier, which would use the same loopholes to shift nearly $1 billion in profits to Luxembourg between 2008 and 2019. His successor as auditor general, Sheila Fraser, also joined Bombardier’s board. Elsewhere, Susan McArthur, who chaired the Canada Revenue Agency board from 2009 to 2013, later sat on the board of Great-West Lifeco, which moved $400 million in profits to Luxembourg between 2012 and 2021.
These are just a few examples of senior officials who once had a front-row view of the tax haven problem, only to later serve companies that relied heavily on the same schemes. Meanwhile, tax haven use accelerated.During his time as vice-chair at Brookfield, Mark Carney oversaw investment funds worth $25 billion registered in Bermuda and $5 billion in the Cayman Islands, structures designed to reduce tax liability while supporting Canadian pension funds.
In the late 2000s, the Organisation for Economic Co-operation and Development (OECD) began promoting tax information exchange agreements(TIEAs), meant to improve transparency in jurisdictions without tax treaties. Few havens had any incentive to sign them, so Finance Minister Jim Flaherty offered a deal: any country that signed a TIEA with Canada would receive the same benefits as treaty countries. Crucially, that meant Canadian subsidiaries there could return profits tax-free.
The policy worked well—for private corporations. Canada now has 24 TIEAs in force, many with known tax havens. The signing of TIEAs with just five tax havens in the early 2010s led to over $47 billion in assets being shifted to those jurisdictions in only five years.
Today, as Professor Alain Deneault of the University of Moncton puts it, “The government has legalized [tax haven] use.” What was once covert has become routine. Decades of policy choices have normalized profit-shifting, leaving corporations free to route income to low-tax jurisdictions and bring it back to Canada at a steep discount, and with no fear of being challenged by the CRA.
This practice is widespread. More than three quarters of companies listed on the S&P/TSX 60 index have at least one subsidiary located in a tax haven. By exploiting the gap between Canada’s tax rates and those of their subsidiaries abroad, these firms avoided an estimated $7 billion in Canadian taxes in 2024 alone
When compliance becomes optional
On paper, corporations are supposed to bring profits back to Canada tax-free if they come from “active business” abroad—meaning they were earned by selling goods or services in that country. In practice, companies use a variety of accounting tricks to make Canadian profits appear offshore.
A common tactic is what’s known as “transfer mispricing.” For many large multi-national corporations, much of their inputs are purchased from their own subsidiaries. By manipulating the prices at which a corporation sells itself a product, be it raw materials or its own intellectual property, corporations can shift profits to subsidiaries in other countries.
While there are rules about how such prices must be set, many large corporations have become very effective at bending or skirting them, and the CRA (especially after years of funding cuts) has largely been unable to keep up.
Wheaton Precious Metals, a Vancouver-based multinational, is one example. In 2015, the CRA accused the company of transfer mispricing and reassessed it for $353 million in unpaid taxes and penalties. Three years later, the case was quietly settled for just $11.4 million. The settlement also allowed Wheaton to book all of its 2024 profits in the Cayman Islands, despite having no mining contracts there.
Wheaton is far from alone. Most of Canada’s largest corporations—including all five major banks, major insurers, manufacturers, and media companies—maintain subsidiaries in tax havens and appear to shift profits abroad to some degree.
International efforts to curb this practice have so far proven weak. The Global Minimum Tax Act (GMTA), an international reform initiative led by the OECD, was implemented in 2024 to curb the use of tax havens. It is designed to ensure that the largest multinational corporations pay at least 15 per cent tax on income earned domestically or through foreign subsidiaries. It was passed into Canadian domestic law that same year.
In theory, the GMTA increases transparency and limits profit-shifting, but in practice, its coverage is narrow. Only the very largest corporations are affected, investment firms may be excluded, and the minimum corporate tax rate it imposes is only 15%—just over half of Canada’s current corporate tax rate. Loopholes for tax credits or “real assets” further reduce the effective rate, leaving a strong incentive to continue using tax havens.
Overall, Canada’s record on global reforms shows a reluctance to confront tax avoidance aggressively. After the OECD’s minimum tax push fell short of fully addressing the global problem of tax havens, civil society groups championed a UN Tax Convention to ensure equitable taxation of multinationals and close loopholes for the ultra-wealthy. In December 2024, the UN General Assembly voted overwhelmingly to move forward, with 119 in favor and just eight opposed. Canada was among the eight voting against it.
The call is coming from inside the house
When we consider the links between prominent public servants and companies that exploit tax havens, alongside the ties many of Canada’s leading officials have had with those same companies over the past several decades, the repeated failure of successive governments to solve this problem—regardless of partisan stripe—becomes clearer.
A 2021 poll found that 92 per cent of Canadians support making it harder for corporations to exploit tax havens. This is a political no-brainer. Yet Canada’s new prime minister, Mark Carney, was formerly chair of Brookfield Asset Management, part of the Brookfield Corporation, a behemoth which maintains at least 44 subsidiaries in tax havens around the world. Despite persistent questioning on the campaign trail, Carney refused to commit to any additional measures to curb their use.
Current Finance Minister François-Phillippe Champagne has also been linked to tax haven use. In 2016, the Le Journal de Montréal reported that Champagne served as director of a company that “transferred payments to one of its two shareholders through a company in the Turks and Caicos—a jurisdiction well known for offshore finance operations.”
Carney and Champagne are in good company, with several former politicians and legislators having had well-documented ties to tax havens while failing to pass legislation to prevent their use when in government. This list includes former PMs Paul Martin, Jean Chrétien, and Brian Mulroney, former Finance Minister Bill Morneau, and former Senators Leo Kolber, Nicole Eaton, andPana Merchant, to name a few.
Profits offshore, costs at home
Canada’s reliance on tax havens is the product of decades of policy favouring large corporations and the wealthy. Yet the last federal election put a spotlight on the intimate relationship between the prime minister and one of the country’s largest corporate players, the aforementioned Brookfield Asset Management.
During his time as vice-chair at Brookfield, Carney oversaw investment funds worth $25 billion registered in Bermuda and $5 billion in the Cayman Islands, structures designed to reduce tax liability while supporting Canadian pension funds. The company itself has been repeatedly flagged as one of Canada’s top corporate tax avoiders, with subsidiaries in multiple offshore havens and a history of paying far below the average corporate tax rate despite massive global profits.
Beyond taxes, Brookfield has profited from ethically dubious practices, including evictions of tenants from affordable housing, large-scale deforestation in Brazil’s Cerrado savannah, and environmental and Indigenous rights violations—all under Carney’s oversight as ESG lead.
Prime Minister Carney could leverage his deep knowledge of corporate tax avoidance to reform Canada’s system and plug the $15 billion annual hole left by offshore tax havens. However, his professional record at Brookfield raises serious doubts. The same strategies that enriched Brookfield and its investors now serve as a blueprint for continued tax avoidance, leaving ordinary Canadians to shoulder the burden of lost revenue while public services face deep cuts.
Ending agreements with known tax havens, requiring real business justifications for offshore subsidiaries, supporting UN tax conventions, and increasing transparency in corporate reporting are all within the government’s power. The choice in front of Mr. Carney is clear, but will he use his expertise to pursue these steps, or merely maintain the system that benefits the wealthy?
The potential exists to close a mounting gap in Canada’s finances and ensure corporations pay their fair share. If the Carney government continues the decades-long trend of federal governments refusing to make these hard choices, ordinary Canadians will once again be left holding the bag.
This article originally appeared in The Breach.
