Skip to main content

The Globe and Mail

Banks urged to find out who is sending money abroad

Trams drive past the offices of Swiss banks UBS, left, and Credit Suisse at Paradeplatz square in Zurich in a file photo.

© Arnd Wiegmann/REUTERS

Canadian banks and other financial institutions should be required to find out the beneficial owners of corporations or trusts that are transferring money overseas, according to recommendations in a new report on tax evasion by Parliament's finance committee.

The all-party finance committee reported Wednesday on the results of a lengthy review of tax havens, but the study immediately drew criticism from NDP and Liberal members who said its 11 recommendations are too vague and will do little to halt the tide of money flowing into offshore tax havens.

"New Democrats' greatest concern emerging from this study is that the Conservatives will persist in their ineffective approach to dealing with tax cheats, despite the overwhelming evidence that a stronger, evidence-based response is necessary," NDP members wrote in a dissenting supplementary report.

Story continues below advertisement

The NDP said it is critical that the government study and quantify the revenue being lost to tax havens to determine the degree of tax base erosion in Canada. The NDP's alternative report also proposes new reporting requirements on corporations that would force them to list all the taxes they pay in every foreign jurisdiction, which would clarify how much tax is being paid – or not – and where the money is going.

The finance committee recommended few major changes to existing practices, but endorsed the creation of a new whistleblower program, promised in the recent federal budget, that would allow the Canada Revenue Agency to pay rewards to people who provide tips about tax evasion.

It also proposed that financial entities covered by money-laundering laws be required to "take reasonable measures to ascertain" ownership information from customers that are corporations, trusts or other entities to make it easier to understand who is moving money offshore.

Most of the remaining recommendations are endorsements to continue current efforts to halt transfers to offshore havens, including continuing to negotiate information exchange agreements with other countries and to encourage all countries to sign the multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Several experts who testified before the finance committee complained that tax information exchange agreements have been ineffective because they require cumbersome efforts to obtain information about accounts in other jurisdictions. The NDP has pushed for a computerized system that would automatically inform other governments about tax information, but banking industry representatives have cautioned about difficulties and dangers in creating a system that automatically shares banking information.

The finance committee spent a year studying tax evasion issues, beginning long before a U.S. journalism consortium published an unprecedented leak of information in early April on 120,000 offshore bank accounts, including 450 held by Canadian residents. Most of the documents related to accounts held in the British Virgin Islands and the Cook Islands.

Commentators said the document leak suggested the use of offshore tax havens was even more widespread than previously believed.

Story continues below advertisement

Dennis Howlett, executive director of lobby group Canadians for Tax Fairness, said he was disappointed the report's recommendations were "weak" and proposed few new concrete measures.

He said governments around the world, for example, have been proposing the automatic exchange of banking information, and said Canada is behind in embracing the trend.

The disclosure would not have to be cumbersome, he added, requiring only that the Canada Revenue Agency be notified when a Canadian sets up an offshore bank account. It could then verify whether those assets are being disclosed for tax purposes.

"Some of this is coming in already in the U.S., and in some of the European Union governments are going ahead with some form of this anyway, so you'd think even for the banks it would be better off for them to have one common system," he said. "It complicates their requirements to provide information if they have a whole lot of different systems from different governments."

Mr. Howlett said the report raises questions about how Canada will deal with calls for tougher offshore banking rules at the next G8 conference in June.

"Will they support some of the more aggressive actions that other governments seem prepared to push, and are already taking, or is Canada going to drag its feet again," he asked. "I hope they get with it, and at least peer pressure will get them to do more."

Story continues below advertisement

Lobby group Canadians for Tax Fairness estimates Canada is losing $7-billion to $10-billion a year to offshore tax evasion. The federal government has not done its own detailed estimates of the amounts lost to offshore tax havens. In its supplementary report, the Liberals said the government has "downplayed the importance" of calculating the losses.

In its supplemental report Wednesday, the Liberal Party said it is obviously difficult to calculate missing tax payments, but said 14 other major countries – including the U.S. and U.K. – have done such estimates.

"It is an important exercise," the Liberal report says. "As a matter of accountability, honest Canadian taxpayers have the right to know how tax cheats are compromising the integrity of the tax base."

Report an error Licensing Options
About the Author
Real Estate Reporter

Janet McFarland is the real estate reporter for The Globe and Mail’s Report on Business, with a focus on residential real estate trends. She joined Report on Business in 1995, and has specialized in reporting on corporate governance, executive compensation, pension policy, business law, securities regulation and enforcement of white-collar crime. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨