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Ottawa (28 Jan. 2021) — A new report has found that Revera Living, the second largest for-profit long-term care and retirement facility company in Canada, appears to be using a web of subsidiaries in tax havens to reduce the corporate income taxes that its subsidiaries in the United Kingdom pay. The report, Tax Dodging by a Canadian Crown Corporation: Revera Living Making a Killing, was produced by the Centre for International Corporate Tax Accountability and Research (CICTAR).
CICTAR found that, while Revera declared a loss of US$12.6 million on its UK operations in 2019, it’s partner in its UK operations is reporting net operating income of $84.8 million. The gap between those two figures is seen to suggest that tax dodging may be taking place.
Profit shifting allows companies to use tax havens to dodge taxes
Revera owns 60 care homes in the UK. Instead of owning the homes directly, it owns them through a number of different subsidiaries. These subsidiaries are based in notorious tax havens like the Luxembourg, Jersey, Guernsey, and U.S. state of Delaware.
CICTAR feels that the combination of the number of subsidiaries Revera has in tax havens and the gap between the net income reported by Revera and its partner “may indicate profit shifting.” Profit shifting is a way companies use tax havens to dodge taxes. As the report explains, "various management fees, administrative fees, interest payments and other seemingly artificial transactions with related parties appear to be used to shift profits out of taxable entities and into tax havens.”
One example of a transaction between two Revera subsidiaries that looks odd is a loan in 2018 with an interest rate of 10% a year — considerably higher than the interest rate financial institutions were charging.
Tax dodging an attack on public services
Tax dodging by large corporations and the wealthy has millions of victims. When large corporations and the wealthy dodge taxes, under-funding of public services is more likely. A report from last year estimated that the amount countries are losing to tax dodging each year is equivalent to the annual salaries of almost 34 million nurses.
Ironically, Revera has blamed under-funding of long-term care for the appalling death toll due to COVID-19 in the long-term care homes it owns. But tax dodging by the wealthy and large corporations contributes to the under-funding of services like long-term care. What the CICTAR report suggests is that Revera is an even bigger part of the problem with long-term care than was previously believed.
Privately owned for-profit long-term care companies can keep activities hidden in Canada
CICTAR was only able to find out that Revera had subsidiaries in tax havens, because Revera operates in the UK and British reporting requirements for companies registered there are stronger than those in Canada. Revera is a privately owned and, in most parts of Canada, it is difficult or impossible to discover if privately owned companies have links to tax havens.
In fact, the secrecy around corporate registrations federally and in most provinces means the public (and agencies responsible for enforcing laws against tax dodging and money laundering) aren’t able to see who really controls companies registered in Canada.
Federal government owns Revera, but won’t take responsibility for what is happening
While Revera is a private, for-profit company and operates like other for-profit companies, it is actually owned by the Public Sector Pension Investment Board (PSP), the federal public sector worker pension fund. The PSP is a crown corporation with board members appointed by the federal government.
The federal government has ultimate control over PSP through its ability to appoint board members, but its response to problems with Revera has been that it is the board of the PSP that controls PSP investment decisions.
Ending secrecy around privatization and corporate ownership first steps
The CICTAR report recommends stricter reporting requirements for Revera and other companies receiving public funding to provide long-term care services. It also recommends that Revera disclose its full corporate structure including what subsidiaries it owns in different jurisdictions.
These are important first steps.
The Canadian government and provincial and territorial governments also need to recognize that the information revealed by the CICTAR report shows how much publicly accessible registries showing the beneficial ownership of companies are needed in Canada. We shouldn’t have to rely on information from other countries to tell us when there are problems with what Canadian companies are up to.