Just when Barbados was hoping the highly negative scrutiny of its offshore financial services sector was a thing of the past in Canada, it is now at the centre of a public political row in Ottawa.
The controversy surrounds James Love, chairman of the Royal Canadian Mint and an adviser to Canada’s Minister of Finance Jim Flaherty.
Love, a blue-chip Toronto attorney, is being accused by news organizations and the opposition New Democratic Party (NDP) in the Canadian House of Commons of playing a role in a tax avoidance scheme in Barbados that involved the estate of Arthur McMeighen, who served as Canada’s prime minister in 1920-21 and again in 1926 and left a large fortune for his heirs.
Thomas Mulcair, the NDP leader is calling on Canadian Prime Minister Stephen Harper to fire Love from the Mint’s chairmanship because of his alleged role in a scheme in which more than
CAN$8 million was transferred from the Arthur Meighen Trust of which he was a trustee. He was alleged to have used corporate entities in Barbados, Bermuda and Antigua to get the money back into Canada without paying taxes.
Love was never charged with committing a crime and it isn’t clear that he did anything illegal. Indeed, legal experts insist he didn’t break any Canadian laws. But the Canadian Broadcasting Corporation, CBC, which recently broadcast an undercover investigation into the way Canadians allegedly use Barbados
to avoid paying taxes to their country’s revenue agency, reported that Love was sued by some members of Meighen’s family for masterminding the scheme which they believe was illegal. The suit was settled in 2011 but the details are now being made public and their release has created a furore that has attracted national attention across the North American country.
As the opposition parliamentarian saw it, Revenue Canada would have been breathing fire and brimstone down the neck of a hairdresser or waiter who didn’t declare
CAN$1 000 in tips but “if you are rich and you’re well connected, in [prime minister] Stephen Harper’s Ottawa you get an appointment and nobody even questions that.”
When the issues of Love, the legal battle over the Meighen financial legacy and the alleged tax-avoidance scheme in Barbados and elsewhere were raised in the House of Commons the other day, the prime minister declined to answer any question about it, asserting that the issue was a “dispute between two private parties before a court”.
Actually, the legal saga has embroiled a long list of plaintiffs and defendants, including Love, Canada Trust, offshore companies in Barbados, Bermuda and Antigua, and major Toronto law firm Ogilvy Renault. At one stage the case had ensnared 15 parties but the details of it were never made public even after it was quietly resolved with a settlement of almost CAN$9 million. None of the parties involved admitted any fault they are not commenting on it even today.
But Mulcair is adamant that Love must be forced from the Mint Board.
Barbados’ minimal tax rate for offshore corporations and its double taxation treaty with Canada have made the island the top offshore financial centre for Canadians who have invested CAN$53.3 billion in the Caribbean country. CBC claims Barbados is on the list of the top 20 countries in the world when it comes to bank secrecy.
It is not illegal for Canadians to use offshore tax domiciles like Barbados, Bermuda, the Bahamas and the Cayman Islands to shield their resources from of their country’s tax laws.
But some of the former prime minister’s heirs are complaining that the offshore arrangements in Barbados and elsewhere put them at risk of “taxes, interest and penalties”.
