The amount of money Canadians have parked in three top offshore tax havens has more than doubled since 2005, showing the scale of tax avoidance in Canada is “getting larger every year,” says lobby group Canadians for Tax Fairness.
The advocacy group, which is pressuring the government to do more to crack down on the flow of money to tax havens, says Canadians now have $59-billion invested in Barbados, $30-billion in the Cayman Islands and $20-billion in Luxembourg -- the three biggest offshore tax haven destinations for Canadian funds.
The $109-billion total is a 150-per-cent increase from $43-billion in 2005, according to new Statistics Canada data on foreign direct investment released this week. While some of the money may represent active business investments in those countries, Canadians for Tax Fairness argues much of the money is simply being put into offshore bank accounts in tax haven countries to avoid taxation or detection.
“The scale of the problem gets larger every year,” says Dennis Howlett, executive director of Canadians for Tax Fairness. “Ten per cent of Canada’s $1.8-trillion GDP is sitting offshore while we struggle with questionable austerity measures.”
Mr. Howlett said the sums are so large that they would stimulate economic growth in Canada if they were invested domestically instead of being “socked away” in tax havens.
“That is $109-billion hidden away, untaxed, while the rest of us pay our share on every cent we earn,” he said.
Mr. Howlett said if Canada had a 1-per-cent withholding tax on money held in tax havens, it would generate $1.7-billion a year. His organization argues federal and provincial governments in Canada lose at least $7.8-billion in revenue annually because of tax havens -- enough to make a major dent in annual budget deficits.
One of the biggest areas of growth for Canadian funds offshore is Luxembourg, where $19.7-billion was invested at the end of 2012, up from just $305-million in 2005. In the same period, Statistics Canada data shows investments in Switzerland have fallen steadily to $3.8-billion from their recent high of $7.6-billion in 2006. Since 2009, Swiss banks have provided more information to other countries investigating money laundering and tax evasion.