Canada’s Caribbean Tax Holiday

There has quite rightly been a lot of discussion about corporate taxes during this election campaign, but very little discussion about cracking down on tax avoidance, whether by legal or illegal means.

Harper of course has a big get tough on crime platform, but the white collar bit is focused on small time fraud against seniors. The Bloc’s platform mentions eliminating tax havens, but there’s no detail or discussion about it.

Buried in this morning’s figures from Statscan on Canada’s direct foreign investment abroad is evidence that tax avoidance and tax havens are a growing problem.  Not only is an increasing share of Canadian direct investment abroad going through finance and insurance industries, but a growing share is also being funneled into tax havens.

Countries considered tax havens  now account for 26% of all Canadian direct investment abroad: totalling close to $160 billion dollars and up from 17% in 2001.   The finance and insurance industry now accounts for a remarkable over 52% of all Canadian direct investment abroad, up from 38% in 2001.

There’s more discussion and a chart that illustrates these trends  in a blog post and I’ve written on this for the Progressive Economists Blog.

Toby Sanger is an economist with the Canadian Union of Public and General Employees and a CCPA research associate.

2 comments

  1. A timely heads up and right on the mark, but a bit brief. How does it work? It’s one thing to figure how much cash is going to tax havens, but what might the figure be when translated into lost revenues? I recall that some European governments had pledged to move on that issue. Have they? If they have, it demonstrates that the problem is fixable given the political will. If others can do it so can Canada.

  2. Hi Pete:
    I have a longer piece on the progressive economists blog on this issue.
    http://www.progressive-economics.ca/2011/04/15/canadas-caribbean-bank-tax-holiday/

    The recently published book “Treasure Islands” has much more detail on this and how it works.

    Quebec economists Leo-Paul Lauzon and Marc Hasbani examined the annual reports of Canada’s big five banks a few years ago and calculated that they were able to avoid $2.4 billion in Canadian taxes in 2007 through their investments in these “Fiscal Paradises” and almost $16 billion over the 15 years from 1993-2007.

    Despite various countries saying they are going to clampdown, it doesn’t appear that key players have made much progress. Not that they can’t, but they haven’t. Again, worthwhile to read the book and to check out the international tax justice network. Countries that lose out most from this are often poorer developing countries.

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