Canadian offshore accounts

canada finance minister morneau

This interesting article about Canada’s pursuits in legislating and controlling offshore business has a number of imbalances. To us it is an example of how data or statistics can be manipulated to support one side or another of the same issue.

While it is obvious that tax competition is a double edged sword in that there are often pros and cons to all sides of the issue…at least Canada has attempted to control offshore opportunities with solid, mutual agreements versus the strong-arming we are now seeing by so many governments towards Panama and the Panama Papers.

The balancing points or questions we add to this article are:

  1. The data here does not include records of how much capital made or saved by these companies in Barbados and other small countries through low taxation come back to Canada as new investment or “research and development” that might otherwise have been eaten up by tax addicted bureaucrats in building unnecessary military armaments or giving out undeserved entitlements domestically.
  2. How much of these tax savings are sitting in Canadian banks available for loans or fueling the economy instead of being spent by various government entities?
  3. What is a fair tax rate for a country like Canada?  50+%?  10%?  Something in the middle? Why not consider a consumption or transaction tax instead of attacking productive incomes?
  4. How can a Canadian company, especially in certain global industries,  compete in the markets without these offshore tax and lower wage job incentives? If these companies cannot compete or survive globally, they will offer zero revenue to the Canadian government.
  5. Canada and other countries have been living very profitably by doing business with offshore and even “rogue” countries like Cuba for decades now where the USA has tried to use unsuccessful embargos to punish dictatorships.  Competition is about more than how much “tax” a business throws back to their government. Maintaining global influence is part of the reason for offshore and low-tax relationships.

As this article suggests, billions of Canadian dollars have flown into these offshore, low overhead countries where those investments are arguably gaining a higher rate of return for Canadians than if they were to remain isolated in a protectionist Canada domicile with all gains being siphoned off by politicos of all persuasions. Until we have a full accounting of Canadian valuation of assets sitting in these foreign companies and banks controlled by Canadians, it is pretty hard to judge whether these offshore agreements help or hinder the ongoing growth of Canada, its overall GDP and its political influence internationally.                                                                           __________________________________

To read the full story and backdrop on the Panama Papers, get our published book here…




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