1 tax haven, 3 of Canada’s biggest banks, 2,000 offshore companies
A new leak of tax haven data lists firms that may be legitimate, but the sheer number has drawn the attention of watchdogs concerned about the relationship Canada’s banks have forged with island tax havens over the past half-century.
RBC, CIBC and Scotiabank appear conspicuously throughout the database of 175,500 corporate registrations on the island nation, which has earned an international reputation as one of the most secretive financial jurisdictions in the world.
According to the data, RBC registered 847 companies, CIBC registered 632 and Scotiabank registered 481 in the Bahamas between 1990 and this past May.
The leaked records provide never-before-seen details behind the intimate relationship Canada’s banks have forged with island tax havens over the past five decades. Some experts even credit Canada’s banking industry with helping pioneer offshore wealth movement to no-tax and low-tax jurisdictions in the Caribbean.
There are legitimate reasons for setting up corporations offshore in traditional tax havens. And there is no evidence of any illegal activity in the corporate registration records, which were obtained through a leak to the International Consortium of Investigative Journalists (ICIJ) and German newspaper Süddeutsche Zeitung and shared with the Star and the CBC.
“It just doesn’t make sense,” said Richard Leblanc, a leading corporate governance expert and professor at Harvard and York universities. “Why are there so many companies registered and such a high volume in a jurisdiction that doesn’t have the population base or the economy to support it? That’s a legitimate question.”
Tax avoidance and evasion are the most obvious concern when secrecy prevails. But there are other more nefarious activities that can easily go undetected, say experts.
“If you want to bribe someone, it’s a whole lot easier to do it offshore through an account that doesn’t have high regulatory oversight,” Leblanc said.
For more than a century, Canadian bank executives have played an instrumental role in shaping the banking laws in tax havens, said Alain Deneault, a professor at the Université de Montréal and author of Offshore: Tax Havens and the Rule of Global Crime.
Starting in the early 19th century and right through to the establishment of the modern offshore system in the 1960s, Deneault said, “Canadian banks customized the legislation in Caribbean tax havens for their purposes: They are states made to allow large companies and wealthy individuals to avoid paying tax.”