BARBADOS MIGHT FIND ITSELF caught in the middle of a Canadian government crackdown on its nationals it believes have money stashed in international financial centres.
In a signal of fallout from the Panama Papers scandal, Canada’s Minister of National Revenue Diane Lebouthillier last week announced action on “aggressive tax avoidance and offshore tax evasion”.
And while officials and the Canada Revenue Agency (CRA) said their first target was the Isle of Man, the head of not-for-profit entity Canadians For Tax Fairness called on authorities to also take action against Barbados and the Cayman Islands.
“Barbados and the Cayman Islands are the two biggest tax havens where Canadian money goes. They need to put those on the list as well,” said Dennis Howlett, executive director of Canadians for Tax Fairness.
In a statement on the issue, Lebouthillier announced several measures would boost the government’s revenues by CAN$2.6 billion over five years. CRA will hire more auditors and specialists to investigate Canadians who have money overseas.
“For example, the CRA will be increasing the number of auditors who focus on those who create tax schemes, from two to 25. We will be hiring another 100 senior auditors to investigate high-risk multinationals,” she said.
“The CRA is also developing robust business intelligence infrastructure for gathering and analysing information that will help detect the growing volume of tax evasion and avoidance activities.
That will allow the CRA to better target promoters of illegal schemes, increase its audit activities, and improve the quality of investigative work focusing on criminal tax avoiders.”
The increased surveillance comes with investment of CAN$444 million to improve the CRA’s “ability to detect, audit and prosecute tax evaders in Canada and abroad”.
“The government of Canada is committed to wiping out tax evasion. Most middle-class Canadians pay their fair share of taxes, but some wealthy individuals avoid paying taxes by hiding their money in offshore tax shelters. This is not fair and it needs to change. These wealthy Canadians should not be able to buy their way out of paying the income tax that they owe,” the minister said.
In a bid to head off any fallout from the release of the Panama Papers, Barbados recently issued a Press release internationally.
It quoted Minister of International Business Donville Inniss as saying: “We understand that government-to-government secrecy undermines the proper functioning of our global economy given that it can be used as a cover for illicit and illegal activity. Such secrecy creates a flashpoint for an emotional reaction that is helping to fuel an anti-offshore sentiment in many G20 nations. However, that emotion is leading to the ‘country profiling’ of all offshore financial centres – a practice that negatively stereotypes legitimate jurisdictions.”
In a statement issued last Friday, Howlett said: “Much of the corporate use of tax havens may be legal but this doesn’t make it right. We need to stop companies from shifting profits offshore. With the second lowest corporate tax rate in the G7, Canadian companies don’t need subsidiaries in tax havens to be competitive.
“Most offshore subsidiaries have little or no staff and are little more than a fictional place to hide profits and avoid taxes. They should not count for tax purposes unless they have economic substance.” (SC)
