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Trouble in ‘Paradise’ for Justin Trudeau

The rich are not like you and me. They have numbered companies, offshore tax havens and pricey lawyers to help them hide their money – not that there's anything wrong with that. Some of them are awfully close to the Prime Minister. Nothing wrong or new about that either. The coziness of plutocrats and politicians goes back for decades, even in high-minded, purer-than-the-Americans Canada.

But when you've styled yourself a champion of the little guy, as Justin Trudeau has done, these things can get awkward. It's awkward when your chief bagman happens to be a guy named Bronfman, whose family, we now know, parks a big chunk of its fortune in balmy offshore tax havens. We know this because of the Paradise Papers, a giant trove of leaked documents that spills the beans on the financial secrets of everyone from Russian oligarchs and hedge-fund founders to the Queen and Bono.

"It is absolutely unacceptable that there be people not paying their fair share of taxes," Mr. Trudeau said in March. It turns out he did not mean people with offshore numbered companies. Instead, he meant farmers, doctors and other members of the petite bourgeoisie. His war on their relatively petty loopholes backfired spectacularly. Then his wealthy finance minister got bogged down in a messy conflict-of-interest scandal involving his not-so-petty holdings in his business. And now we find out that that Mr. Trudeau is chummy with billionaires who have fortunes stashed offshore. It's not a good look. Middle-class Canadians are muttering, "These guys are just a bunch of shameless hypocrites."

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So far, there's no reason to think there's anything improper about the Bronfmans' offshore dealings. But that's not the point. The point is that we've been reminded – once again – that the super-wealthy of the world have special privileges that are not available to the likes of you and me. They are able to use the finest lawyers and accountants to keep their money out of the claws of governments and stay just this side of the legal line. And some use their power and connections to keep taxes and regulations as minimal as possible.

"The ranks of the superrich are growing fast," reports The New York Times, which also dived into the Paradise Papers. "And the offshore finance industry has grown alongside its customers' accounts."

In Canada, the relationship between the Bronfman dynasty and the Liberal dynasty is a classic example of crony politics at work. The friendship between Stephen Bronfman (heir to the Seagram fortune) and Justin Trudeau goes back to their childhoods. Mr. Bronfman's godfather, Leo Kolber, was the Liberal Party bagman for two decades. Stephen Bronfman inherited the job from him.

Leo Kolber was the consigliere to the Bronfman family, as well as a political fixer of the highest order. (The Kolbers also had a family trust in the Cayman Islands, which had dealings with the Bronfmans.) Political fixers are friends with everyone, and Mr. Kolber and the Bronfmans also made generous donations to Brian Mulroney's leadership campaign. In 1983, Mr. Kolber was appointed to the Senate by Justin's father, Pierre. There he became chairman of the powerful Senate banking committee, where he played a role in lowering capital gains taxes. While he was chair, legislation to crack down on offshore tax havens stalled on Parliament Hill.

It had been clear for years that Canada's lax rules involving tax havens were a leaky sieve for billions in untaxed revenues. But tightening those rules would probably have been deeply inconvenient to the government's closest friends. New legislation wasn't revived until 2007, after the Conservatives had come to power.

For more insights into how the system works, just ask Mr. Trudeau's top minister, Chrystia Freeland. Ms. Freeland, who is currently the minister of global affairs, also wrote a prize-winning book called Plutocrats, which deals with the growing gap between the global superrich and everybody else. "Here is the most important economic fact of our time," she said in a TED talk she delivered in 2013. "We are living in an age of surging income inequality, particularly between those at the very top and everyone else."

What's driving the inequality? One set of causes is political, she explains – lower taxes, deregulation, privatization. Many of these political factors can be broadly lumped under the category "crony capitalism." Many of the globe's new fortunes have been created by the meritocracy – the people who created Amazon, Apple, Starbucks. But what should concern us is how easily the meritocratic plutocracy can become crony plutocracy. "It gets tempting at that point to use your economic [power] to manipulate the rules of the global political economy in your own favour," Ms. Freeland said. "They also happen to be particularly adept at working the international tax system."

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The Paradise Papers are a good reminder of the way the world really works. While Mr. Trudeau tries to chisel nickels and dimes from small business people in the name of tax fairness, the rich are getting away with murder. And it's legal. And people think that stinks.

As for Mr. Trudeau's effort to style himself as a populist, my advice is to stop. All he does is make things worse. People figure he's just a crony politician like everybody else. And they're not wrong.

Trudeau says Liberals haven’t waited for leaks to target tax evasion (The Canadian Press)
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About the Author

Margaret Wente is one of Canada's leading columnists. As a writer for The Globe and Mail, she provokes heated debate with her views on health care, education, and social issues. She is a winner of the National Newspaper Award for column-writing.Ms. Wente has had a diverse career in Canadian journalism as both a writer and an editor. More

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