RBC treats Canadians who believe in playing by the rules like total fools

21 March 2013

April Fool’s Day came two weeks too early for MPs at the Finance Committee’s ongoing hearings into “Tax Evasion and the Use of Tax Havens.”

 On March 21st — a day when headlines were dominated by the federal budget — Royal Bank of Canada’s “Deputy Chief Anti-Money Laundering Officer” gave a truly bewildering response when an MP asked point-blank if he considered Barbados and the Cayman Islands to be tax havens:

 “I wouldn’t define them as tax havens,” said Russel Purre, RBC’s money laundering watchdog.

That’s pretty rich coming from RBC. Especially since the Tax Justice Network has estimated RBC manages $127.5 billion in assets offshore and RBC’s own financial statements indicate they operate subsidiaries in the Cayman Islands, Barbados, Bahamas and the Channel Islands among others.

RBC (along with representatives from major Canadian banks like BMO, CIBC, HSBC, Soctiabank, and TD Canada Trust) had been called to testify after Canadians for Tax Fairness and the Tax Justice Network raised serious questions about the size and scope of the use of tax havens by Canadian companies at an earlier hearing that even shocked Conservative MPs.

NDP MP Murray Rankin appeared to take issue with slippery definitions and word play by the bankers to downplay their level of activity in offshore financial centres.

Rankin cited the Canadian Revenue Agency’s own definition of a tax haven as a “jurisdiction with one of the following: no tax, or very low rates of taxation; strict bank secrecy provisions; a lack of transparency in the operation of its tax system; and a lack of effective exchange of information with other countries.”

Rankin continued by asking the RBC representative how he could square this definition with the fact that Canadians ‘invested’ $53 billion in Barbados and $25.8 billion in the Cayman Islands in 2011 alone.

RBC’s response? Read this excerpt from the transcript:

Murray Rankin (NDP Victoria)

Well, how about Barbados, with a population of 284,000, where $53 billion was invested by Canadians in 2011, or the Cayman Islands, with a population of 55,000, and $25.8 billion was invested by Canadians in 2011 alone?

RBC does business in those jurisdictions?

Russel Purre (RBC):

Absolutely. Again, when we talk about… In reference to, I’m thinking, the honourable member’s earlier question, these dollars represent the flow of trade that takes place through those jurisdictions. RBC supports, as do all other global financial institutions, global financial transactions.

Murray Rankin:

And they’re not tax havens?

Russel Purre:

Again, when we look at both the Cayman Islands and Barbados, from an information-sharing standpoint, their compliance with OECD standards, I wouldn’t define them as tax havens.

Murray Rankin:

Alright. The government of Canada appears to differ.


Canadians have every reason to be skeptical of RBC’s “definitions.”

As the United States Congressional Research Service (who identifies Barbados and the Cayman Islands as widely recognized tax havens) diligently noted in their recent report on tax havens and tax avoidance published in January 2013, the OECD doesn’t exactly ‘define’ who is or is not a tax haven so much as it identifies who’s agreed to follow a fairly weak and impotent set of standards.

To this end, the OECD keeps three lists to measure tax havens—white, grey, and black, noting who’s implementing the standards (white), who’s agreed in principle (grey) and who’s refused (black). Of course, by the OECD standard, Barbados and the Cayman Islands join other squeaky clean jurisdictions like Cyprus, Lichtenstein, Luxembourg, Bermuda, the Bahamas, Jersey, the Isle of Man, and others of their ilk on the white list.

The CRS raises serious doubts about the reliability of using OECD standards to identify tax havens since “many countries that were listed on the OECD’s original blacklist protested because of the negative publicity and many now point to having signed agreements to negotiate tax information exchange agreements (TIEA),” though the report cites analyses that find that “the reduction in the OECD list was not because of actual progress towards cooperation” and “little real progress has been made in reducing tax haven practices.”

As always, the devil is in the details.

But we think most Canadians have enough commonsense to realize the Cayman Islands is, in fact, a tax haven.

As the saying goes, fool us once, shame on you, fool us twice…