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Tony Merchant (CTV)
Tony Merchant (CTV)

banking

Document leak reveals widespread use of tax havens Add to ...

A massive leak of data about bank accounts held in international tax havens is raising new calls for a global crackdown on tax cheats.

The International Consortium of Investigative Journalists, based in Washington, D.C., revealed this week that it has received an unprecedented leak of documents containing financial information from about 120,000 offshore bank accounts, including 450 held by Canadian residents.

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The ICIJ said the documents reveal information about “dodgy characters,” such as people running Ponzi schemes and stock scams and hiding money in offshore accounts, but also the names of prominent politicians, business leaders and even U.S. doctors and dentists.

The ICIJ has partnered with media outlets in countries around the world – including the CBC exclusively in Canada – to sift through and report on the leaked data.

The CBC has not revealed the names of the Canadians with offshore accounts, except to report that Regina lawyer Tony Merchant has set up a bank account with $1.7-million in the Cook Islands. Mr. Merchant and his wife, Liberal Senator Pana Merchant, did not reply to requests for comment Thursday.

Queen’s University law professor Art Cockfield, who reviewed the leaked documents with the CBC, said Thursday the scale of the leak is unprecedented, involving 2.5 million documents.

Prof. Cockfield said they suggest a far more widespread use of tax havens than experts had previously thought. The documents relate primarily to accounts in the British Virgin Islands and the Cook Islands, which he noted are not the world’s largest tax haven destinations.

“If that’s just a couple of service providers in a couple of small islands, one gets the sense that the problem may be even greater than all of the analysts thought in the past,” he said. “It’s immense. We’re just seeing a little slice of the problem.”

Experts believe $20-trillion to $30-trillion may be hidden in offshore tax havens to avoid detection.

Dennis Howlett, executive director of lobby group Canadians for Tax Fairness, said the documents reveal the secrecy and complexity involved when money is moved around the world to avoid taxation, with numerous e-mails, faxes and account documents included in the leaked data.

“This really reveals how the whole system works,” Mr. Howlett said in an interview. “There’s a level of detail here that we just haven’t had before, which is very interesting.”

He argued the new information should convince Ottawa to scrap plans to cut staff levels at the Canada Revenue Agency, arguing the government should instead provide more resources to fight tax evasion.

His group estimates Canada is losing $7-billion to $10-billion a year to tax evasion. That amount would almost cover Canada’s federal deficit, he said.

While there are relatively few Canadian accounts on the recently leaked list, that should not be taken as a sign that there is less tax evasion in this country, Mr. Howlett argued. He said the top tax havens for Canadians are Barbados, the Cayman Islands, Ireland, Luxembourg and Bermuda – not the Cook Islands.

“This [leaked] information comes from smaller tax havens – these are not the major destinations of Canadian money going offshore,” he said. “This is not the whole story at all. This is just the tip of the iceberg.”

Minister of National Revenue Gail Shea issued a statement Thursday calling on the ICIJ to hand over the list of names to the government so it can be used to find tax evaders.

“Anyone with information on tax cheats has an obligation to bring it forward,” she said. “The release of this information is good news for the hard-working Canadians who pay their fair share. This is bad news for the tax evaders in this country.”

The 2013 federal budget promised measures to crack down on tax cheaters – with new investigative powers and a new snitch line – but the reality is that the Canada Revenue Agency is facing a $60-million cut to its 2013 budget on top of a $253.1-million cut to its 2012 budget. The CRA is expected to lose 3,008 staff positions, making it the hardest-hit federal department in terms of job losses.

Liberal Senator Percy Downe, who has been researching tax haven issues for several years, argues the government would actually bring in more money if it boosted the CRA’s investigative budget.

“Why won’t they put the resources in to address the problem?” he asked.

It is not illegal to set up a bank account in another country, but it is illegal to evade paying taxes by hiding assets. The CBC said Thursday it will do more stories in the “weeks and months to come” about Canadians with offshore accounts, but it will not release the raw data about account holders because it is “mindful of the reality that holding an offshore account is not evidence of wrongdoing and may not be controversial.”

 

 

BY THE NUMBERS

$21-trillion U.S.

A conservative estimate of the amount of money held in offshore havens, according to a 2012 report by James S. Henry, former chief economist at McKinsey & Company. That is about the size of the U.S. and Japanes economies combined.

$1-trillion

A conservative estimate of the annual cross-border flows of proceeds of financial crimes, according to the International Consortium of Journalists

 

 

KEEPING IT SECRET

HIGHEST LEVEL OF SECRECY

Maldives, Nauru

SECOND HIGHEST

Antigua & Barbuda, Netherlands Antilles, Bermuda, Brunei Darussalam, Bahamas, Belize, Vanuatu, Grenada, Guatemala, St Kitts & Nevis, Lebanon, St. Lucia, Liechtenstein, Samoa, Liberia, Marshall Islands, Monaco, Montserrat, Seychelles, Turks & Caicos

THIRD HIGHEST

Andorra, United Arab Emirates (Dubai), Anguilla, Aruba, Barbados, Bahrain, Botswana, Switzerland, Uruguay, Cook Islands, Costa Rica, Dominica, Guernsey, Ghana, Gibraltar, Hong Kong, Jersey, St. Vincent & Grenadines, Cayman Islands, Monaco, Mauritius, Malaysia, Panama, Philippines, Singapore, San Marino

 

 

NAMING NAMES

These are some of the prominent people identified in leaked documents who hold offshore bank accounts. Almost all of them said this week that they have broken no laws and did not set up their accounts to evade taxes.

Tony Merchant, Regina lawyer and husband of Liberal Senator Pana Merchant

Bidzina Ivanishvili, Prime Minister of Georgia and a billionaire businessman

Olga Shuvalova, wife of Russian deputy prime minister Igor Shuvalov

James S. Mellon, heir to the Mellon oil and banking empire, who said he has liquidated all of his offshore holdings

Maria Imelda Marcos Manotoc, Philippine provincial governor and daughter of former president Ferdinand Marcos

Denise Rich, former wife of convicted U.S. tax evader Marc Rich, who was pardoned by President Bill Clinton

Baroness Carmen Thyssen-Bornemisza, Spanish widow of a Thyssen steel company heir

Bayartsogt Sangajav, deputy speaker of Mongolia’s parliament

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