Canada accused of failing to crack down on rich dodging taxes

Canada’s government has been accused of turning a blind eye to dirty deals that allow the rich to dodge taxes on multimillion-dollar property deals and new financial assets.

The government of the prime minister, Justin Trudeau, has made promises to crack down on global tax avoidance schemes, but has failed to deal with what watchdog groups see as a major weakness in its tax system: secrecy.

Despite successive tax inquiries into how the wealthy avoid paying taxes on assets they own through offshore accounts, Canada’s tax laws do not require the source of money to be revealed.

Concern over this has heightened in recent years, since the Financial Action Task Force called on countries to identify the beneficial owners of offshore companies and to make them public.

The prime minister made a major pledge to disclose the names of those benefiting from tax schemes, but to no avail. In its most recent tax plan, the government made it easier for some of the rich to hide their money offshore but this did not help Canadians, who don’t benefit from offshore havens.

Many of the richest Canadians seek to avoid taxes by moving funds through offshore vehicles called securitization trusts. Securitization trusts, or TDs, are often run by foreign trusts, and can buy and sell assets in Canada. This allows the accounts’ owners to avoid paying taxes in their home country.

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By using these trusts, companies can also offer the public investment vehicles to raise hundreds of millions of dollars to buy real estate, private securities or other assets. This can allow people to buy their own homes for a low price but they avoid the large stamp tax and give their money to the foreign trust that has then sold the properties to benefit the rest of the country.

According to a report by the non-profit Public Sector Integrity Commissioner, from 2008 to 2010 the government of former prime minister Stephen Harper’s government approved about 350 applications for new securitization trusts. But of those, only 10 were evaluated and granted approval, with several requiring the funds to be put in escrow for two years for a review.

“Where is the report on this?” said Bill Tieleman, head of the Liberal party’s fundraising arm, offering an explanation for the inability to find it. Tieleman said Canadians should be able to access the statistics.

There is also a debate about how Trudeau’s government dealt with controversies about foreign trusts. One called M&M Trusts, was used by wealthy investors to move money offshore through the name of a charitable trust on a mortgage fund of investments which the investor could then purchase and sell.

As part of the company’s investment activities, the M&M Trusts purchase real estate properties from companies incorporated in countries that require disclosure of ownership.

The government approved these trusts, setting them up in their own country, but giving the investors a Canadian address which effectively enables them to continue to hide their own names from the rest of the country. The trusts can then sell the real estate properties back to the same company that started them, and reap the profits. But if that same company does not exist any longer, Canadian law prohibits Canadians from benefiting from such transactions.

Some of the Conservative members of parliament repeatedly pointed out that Trudeau’s Liberal government approved trusts that were more than twice the size of those that the previous Conservative government had approved.

One of them was pressed on why he had approved this trust when the previous Conservative government had called into question one of the trusts.

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