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Owners of 22 Canadian P3s use tax havens to avoid taxes

“Thanks to P3 privatization schemes, money that should be funding quality public services is ending up in tax havens.” — Larry Brown, NUPGE President

Ottawa (06 Nov. 2017) — Because of their use of tax havens, 4 companies with extensive investments in Canadian P3 privatization schemes paid less than 1 per cent in income tax in 2016. A lot less.

Between them — International Public Partnerships, HICL Infrastructure Company Limited (HICL), Bilfinger Berger Global Infrastructure (BBGI) and John Laing Infrastructure Fund (JLIF) — own, or partially own, 22 P3 privatization schemes in Canada. These include P3 schools in Alberta and the Vancouver General Hospital Academic Ambulatory Care Centre.

In 2016, the before-tax profits of these 4 companies added up to $981.5 million. However, the total tax bill was only $1.2 million or 0.12 per cent. The reason for such low tax bills is that all of these investment companies have their headquarters in tax havens — 1 in Luxembourg and 3 on Guernsey in the Channel Islands.

“Thanks to P3 privatization schemes, money that should be funding quality public services is ending up in tax havens,” said Larry Brown, President, National Union of Public and General Employees (NUPGE).

Use of tax havens widespread by companies involved in privatization — challenge is tracking it down

There are numerous examples of tax havens being used by companies involved in privatization. The challenge is tracking them down. To put it mildly, companies involved in privatization don’t want to advertise their use of tax havens. The activities of International Public Partnerships, HICL, BBGI and JLIF came to light because of a recent report by Dexter Whitfield of the European Services Strategy Unit (ESSU).

In Canada, because of how easy it is to set up anonymous companies, finding out how many companies have links to tax havens is a challenge. That’s where sources from outside of Canada, like the ESSU report, can be helpful. Another example is information from Nevada gaming regulators, which enabled UNITE HERE to find out that the owner of a number of privatized federal government office buildings, Larco, was making extensive use of tax havens.

Secrecy makes use of tax havens easier

What makes it easier for companies involved in privatization to use tax havens is the level of secrecy surrounding privatization schemes. Because key details are kept hidden from the public, we can’t even be sure how much public money is going to companies involved in privatization.

This lack of transparency makes a mockery of the claims used by companies involved in privatization to try to defend their use of tax havens. When we can’t verify how much their Canadian subsidiaries are getting from privatization, or how much tax they are paying, the claims by companies using tax havens that their subsidiaries pay taxes are meaningless. The many ways that companies can shift funds to related companies in tax havens are well documented. It is impossible to believe that those companies involved in privatization that use tax havens are not also using every means at their disposal to minimize their taxable income in Canada.

“Does anyone seriously imagine that companies involved in privatization would be using tax havens if it didn’t allow them to avoid paying taxes in countries like Canada,” said Brown.