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“It is too early to be certain whether this dip is an emerging trend, or just a blip as has happened before. But this could be a sign that global efforts to curb corporate profit shifting to tax havens may be paying off." — Dennis Howlett, executive director of Canadians for Tax Fairness
Ottawa (27 April 2017) — The amount of Canadian corporate money in tax havens has fallen for the first time in a decade, according to Canadians for Tax Fairness.
The total stands at $261 billion at the end of 2016, down from $272 billion in 2015, according to Statistics Canada foreign direct investment figures released this week. Much of that decrease is traceable to a 73 per cent drop in Canadian corporate dollars invested in Ireland. Decreases were also recorded for Luxembourg and Bermuda.
More data needed
“It is too early to be certain whether this dip is an emerging trend, or just a blip, as has happened before," says Dennis Howlett, executive director of Canadians for Tax Fairness. "But this could be a sign that global efforts to curb corporate profit shifting to tax havens may be paying off."
Canadian corporations still have billions in tax havens
But Canadian dollars in tax havens still amount to a quarter of all foreign investment. While some investments in tax havens have economic substance, most are going there to dodge billions in taxes as they shift profits to offshore subsidiaries and affiliates.
Barbados continues to be the top destination for corporate money offshore. In 2016, corporate money was booked there increased by $6 billion, raising the total to $68 billion. GoldCorp, Barrick Gold, Fortis, Petro-Canada and Gildan are among the Canadian companies who have set up subsidiaries in Barbados. The Canada-Barbados Tax Treaty facilitates booking profits there and repatriating the dollars back to Canada, tax-free. There are similar deals to be had with Luxembourg and Cayman Islands. And they remain the second and third preferred offshore destinations for Canadian money.
Tax havens cost Canada billions needed for healthcare, childcare and education
The top 5 tax havens account for $235 billion – most of the money that goes offshore. They are: Barbados ($68 billion), Luxembourg ($60 billion), Cayman Islands ($48 billion), Bermuda ($39 billion), Bahamas ($20 billion). The tax-free status of this money results in a loss of billions of dollars to the Canadian treasury.
“That lost tax revenue could be invested in things that matter to all Canadians — health care, childcare and education,” says Howlett. “It is time for Canada to renegotiate these tax treaties with tax haven countries and territories.