Showing that no country in the world limits itself from using tax havens, recent data indicates that corporate Canada has $353 billion sitting in tax havens.
This recent data comes from Statistics Canada. The information indicates that Canadian corporations held $353 billion in tax havens in 2018, spread across 12 of the biggest tax havens in the world. The tax haven with the largest percentage of these funds is Luxembourg, where corporate Canada holds $90 billion. That figure indicates an increase of $8.4 billion just since 2017.
Following Luxembourg, the next biggest tax haven for Canadian corporations is Barbados with $65 billion. This is followed by Bermuda with $47 billion and the Cayman Islands with $40 billion.
Part of a Rise
Previously, when Stephen Harper was in charge of the country with his conservative government, the amount that corporate Canada had in tax havens had reached record levels. The recent statistics, however, show that those then-record levels have been beaten and that there is a new all-time high.
Comparing Tax Havens to Other Canadian Investment Destinations
If you were to look at more analysis of the data to put it into perspective, it shows some interesting points. Luxembourg is now the third top destination for Canadian corporations’ investments. It still sits behind G7 trading partners and admittedly just represents a fraction of the investments in the top-ranked country.
That title belongs to the U.S. with $595 billion. The UK had Canadian direct investments of $109 billion in 2018, which is very close to the tax haven Luxembourg’s figure of $90 billion. Barbados and Bermuda are now in the fourth and fifth spots for Canadian corporate cash destinations.
Additional Interesting Points
The statistics also highlight that Luxembourg sends a large chunk of money back to Canada. The country only has a population of 500,000, yet it sends $56 billion to Canada, compared to the $90 billion Canada sends to Luxembourg.
What Experts Say
The director of Canadians for Tax Fairness, Toby Sanger, indicates that corporate Canada is taking advantage of the system of corporate taxes by moving profits among shell companies in various countries. He explained that corporations find it easy to create a subsidiary in a tax haven, then shift their profits there. This lets them report no profit within Canada despite making real profits there. Meanwhile, they report the profit in the subsidiaries in jurisdictions with no or low taxes. Sanger specifically pointed to Husky Energy in Alberta as one example with its interactions in Luxembourg.
According to Sanger, the government’s claims that it will be tough on companies using tax havens to pay low corporate tax seem to not have much impact. High-net-worth individuals and corporations continue to take advantage of tax havens to get out of paying their fair share of taxes. Those, like Sanger, who find issue with tax havens call for tougher laws and stricter enforcement.
There are further controversies related to taxes in Canada as the CRA has recovered about $14.9 million worth of penalties and taxes following the Panama Papers but has not pressed any criminal charges.
This is all good news for those in Canada who take advantage of tax havens but bad news for those who oppose them.
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