The companies involved are all registered in the Bahamas, a tax haven, and originally came to light as part of a leak of financial records called the Bahamas Leaks. In filings with the Federal Court of Canada, the CRA says most companies have used tactics to “confound the identity of the individuals who actually control and beneficially own these entities” and wants to check whether the beneficial owners are Canadians who are hiding money from taxpayers. paradises. “The CRA is concerned that any or all of these 97 Bahamian companies may be controlled and/or owned by beneficial individuals resident in Canada,” the agency said in a court filing. Canadian individuals and companies they have $23 billion in declared, known funds held or invested through the Bahamas — more than France, Spain and Portugal combined. ONE CRA Study 2018 suggested that Canadians have another $76 billion to $241 billion in undeclared, hidden wealth hiding in all offshore jurisdictions combined, but did not break it down by country. In May, a judge granted the federal government’s request for an order for Royal Bank and its subsidiary RBC Dominion Securities to provide any information that would help the CRA trace the owners of the 97 Bahamian companies. The bank did not oppose the government. The CRA says in its court filings that all of the companies had investment accounts at Royal Bank or RBC Dominion at some point, “suggesting that they may have been controlled or controlled by persons residing or located in Canada.” It is not inherently illegal for Canadians to have an offshore account or company, but any assets over $100,000 and any income must be reported for tax purposes.
CRA mom for other banks
CBC/Radio-Canada originally reported in 2016 that the Bahamas Leaks revealed that three Canadian banks had provided services to nearly 2,000 offshore companies in the Bahamas since 1990. The banks were what are known as “registered agents” — licensed intermediaries who pay annual fees to the Bahamas corporate registry, manage the documents and in many cases they incorporate the offshore companies as well. The leaked records showed that Royal Bank acted as an agent for 847 Bahamian companies listed in the leaked data, companies with names from Abbatis 1 Inc. to Yellow Jacket Holdings Ltd., while CIBC listed or managed 632 and Scotiabank handled 481. Royal Bank did not respond to questions from CBC News about the Bahamian companies, but provided a statement saying that in general, it has “high standards and an extensive due diligence process to detect and prevent any illegal activity occurring through RBC.” . Neither the CRA nor RBC would explain how the number of offshore interest companies fell to 97 from 847. Part of that decline is likely because even in 2016, almost half of those companies were already dormant or dissolved. It is possible that the CRA also determined that many of the companies did not have Canadian shareholders or other ties to Canada that could result in tax liabilities. Toby Sanger of Canadians for Tax Fairness says the Bahamas is a notoriously secretive jurisdiction where people often funnel money to stay hidden. (CBC) There is no indication in the Federal Court file that the CRA has also gone after any of the companies managed by CIBC or Scotiabank. It is possible that the tax department received information directly and in confidence from these two banks using powers under the Income Tax Act that do not require it to obtain a court order first, but it would not say. “The CRA does not generally release information related to our compliance approaches as it could provide a roadmap for non-compliance,” the agency said in a statement to CBC News. “As such, we are unable to confirm whether the CRA will seek authorization to retrieve third-party data from CIBC and Scotiabank.”
‘Very disappointing’
Toby Sanger, senior policy adviser at the advocacy group Canadians for Tax Fairness, said the lack of transparency doesn’t help the impression that the CRA “seems to be more focused on going after the easy targets, the people with little time.” despite the larger and more complex offshore tax evasion and avoidance cases.
“We shouldn’t just be writing these blank checks allowing rich companies and people with money in whatever jurisdiction they decide to park it to avoid taxes,” he said in an interview.
The CRA, which was proclaimed in the wake of other leaks, such as the Panama Papers and the Paradise Papers, that this it was beat on offshore tax irregularities, he also would not explain why he is only seeking ownership records for the 97 offshore companies now – six years after the Bahamas Leaks brought them to light.
“It is very frustrating and disappointing that it has taken so long for the CRA to act on these leaks,” Sanger said. “The slow action in this Bahamas Leaks case means it’s just kind of crying wolf and it’s more bark than bite.”
The Bahamas Leaks files were obtained by Sueddeutsche Zeitung, the same German newspaper that leaked the Panama Papers, which then shared the files with the Washington-based International Consortium of Investigative Journalists and its network of global media partners, including of CBC/Radio-Canada .
The Panama Papers surfaced a few months earlier in 2016, but the CRA has yet to bring criminal charges against anyone named in that leak. Other countries have already brought hundreds of charges and secured convictions.
The CRA received nearly $1 billion in additional funding between 2016 and this year to fight tax evasion and avoidance. In an email to the CBC, the agency could not point to a single criminal conviction obtained in the past 4½ years related to offshore tax evasion.
The agency said last week that at one point it had five open criminal investigations stemming from the Panama Papers, but has since dropped three. The two remaining cases appear to be ongoing for $77 million alleged withholding-tax evasion in Vancouver, and one research on an oil financier in Alberta.
