In Canada, there is a man who helped other rich people arrange billions of dollars in secret tax-saving schemes — an arrangement called “transaction tax optimization” — by secretly setting up companies in offshore tax havens like the British Virgin Islands, Cayman Islands and Singapore. The man has been referred to as “the company man” because, among other reasons, he set up his clients’ entire portfolios. He was not registered with the stock exchange and did not provide them with proper financial statements — in fact, many of the transactions may have been bogus and blatantly illegal.
The company man has not been named, but the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, a government watchdog that prosecutes tax-fraud, has been investigating him and could be laying charges soon. A CBC story released Monday said he was already under investigation in the United States. As The Wall Street Journal points out, the agency’s investigation and other people’s accusations are likely just the tip of the iceberg: Canada’s politicians don’t want to be the ones to disclose that Canada’s wealthy are illegally trading in Swiss bank accounts and treating local banks like a customer service for offshore companies.
The company man’s “complex, mobile financial networks” enabled his clients to live an “impossible dream” — that their taxes would be equal to their entire wealth, according to Fintrac’s extensive investigation of the man. He helped 400 of them avoid paying $5 billion in taxes, according to the CBC.
More than 50 countries, including Canada, levy the “deposit tax” of 0.1 percent to 0.25 percent on every financial transaction. But because financial institutions say they don’t collect any of the tax, they’re not subjected to regulation. That raises the question: Who exactly is paying this tax? Fintrac itself believes it is the super-rich. “Somebody’s always smiling over there, and that smile is making us poor,” Dr. Gurdeep Lakhmi from the Indian Institute of Management in Mumbai told the CBC.
Fintrac has been tightening the screws on offshore tax havens, imposing more direct sanctions and sharing information with other countries on about tax evasion that has been going on for years. But in Canada, the Canadian government has “turned a blind eye” to keeping that from happening. Robert Buckley, a former senior official at Fintrac, recently told CTV News that the agency was operating outside of its mandate.”[T]he government appears to be operating off an optimistic model for financial markets, that market participants are fully self-regulated,” he said.
Fintrac has “turned a blind eye to a number of illegal offshore companies and financial investments with the intention of avoiding scrutiny” under Canada’s Part III Criminal Code, according to the CBC. Buckley said he told government officials the agency was “slow to act.”
He added that Fintrac “only regulates the companies, not the participants in those companies or individuals who use those companies.”