selling pancakes and maple syrup, such that you want to avoid
paying tax on your millions, Barbados is the place to stash
your winnings.
Of course, you can partake of Canada's world class education,
hospitals and other services, and yet feel no need to contribute
your hard-earned money, because you're working within
the law (an edifice with more holes than swiss cheese).
But, if you're "a restaurant", all you need to show is
that something's cooking in Barbados, besides the books.
You need to do is make your lie believable and
Customs and Exise will leave you be.
checkit: CBC News
Tax
avoidance: Canada-Barbados tax deal loopholes revealed
By
Timothy Sawa, Posted: Oct 04, 2013 6:54 PM ET|Last Updated: Oct 07,
2013 11:01 AM ET
An
exclusive CBC News hidden-camera investigation into the world of offshore
banking found professionals in Canada
and Barbados willing to help hide business profits in Barbados by exploiting
loopholes in a long-standing tax saving arrangement between the two
countries.
“My
advice to [the Canada Revenue Agency] would be, every time you see a Barbados
[company] in the structure, investigate it,” said an individual who used to run
one of Canada’s largest offshore companies and also spent time in prison.
For
decades, Canadian companies have flocked to Barbados with their cash in order
to legally avoid paying Canadian taxes. If a Canadian company wants to expand its business outside of Canada, it
can create a subsidiary in Barbados where it can park its international profits.
This way, it legally doesn’t have to pay Canadian taxes on those profits.
Since
the 1970s, Canadian companies have flocked to Barbados with their cash in order
to legally avoid paying Canadian taxes. CBC
News hired a private investigator to see if he could create an offshore company
in order to test the system and to see if his Canadian restaurant profits could be shifted to Barbados. (The Associated
Press)
More
than 1,000 Canadian companies,
including giants like Petro-Canada and
Loblaws, have legitimate offices there[BARBADOS]. Canadian banks are on almost every corner to serve all the Canadian
companies.
As
part of the joint investigation with Enquête, the CBC’s French-language
investigative program, CBC News hired a private
investigator, who is also a restaurant and bar owner in Toronto, to see if
he could create an offshore company in order to test the system and to see if
his Canadian restaurant profits could be shifted to Barbados.
CBC
policy for hidden-camera journalism
CBC's
policy for hidden-camera journalism generally requires that we have credible information about wrongdoing
before we film.
However
when dealing with a secretive industry like this one, when the industry as a
whole has come under critical scrutiny, the practice is to permit testing in
this way, on a random basis.
That
way, instead of being taxed at 30 per
cent in Canada, he would pay the rate in Barbados — 2.5 percent.
“Unless
CRA's got the money to come down and
check us out, you'll get away with
it. And that's the reality,” said the insider.
In
order for that to be legal, his business must have legitimate international sales, which it doesn’t.
■Ex-Revenue
Canada lawyer advised how to hide money offshore
■Tax
havens explained: How the rich hide money
■How
Canada's banks help money move in and out of tax havens
The CBC’s undercover businessman met Allan
Madan, an accountant in Mississauga, Ont., who offers tax tips online —
including the top 20 ways to beat the taxman — and other international tax
advice.
In a
meeting recorded with hidden cameras, Madan suggested the businessman fly his
chef to Barbados to invent recipes there.
“You'd
have to have some physical presence on
the ground, you know, because who's developing these recipes? Do you know
what I mean? Is there a chef or does the chef fly down there and do the work
there?”
He
said the man would also need an offshore
office, one that’s managed and controlled in Barbados by nominee directors.
These
directors for hire often know little or
nothing about the company.
“I'm
not saying we're going to shift all the income, that may not be possible, but
maybe, you know, 25 per cent of it,”
Madan said.
“So
you've done this before, like you've got experience doing this?” the
businessman asked.
“Yeah,
absolutely, so you don't have to worry,” Madan said.
Madan
then referred CBC’s undercover businessman to Andrea Mullin Henry, a
Canadian-born Barbadian who also runs a law
practice called Crane Chambers in Barbados. The businessman travelled there
to meet her.
Mullin
Henry, who is still a member of the Ontario bar, also specializes in creating
and managing offshore companies in order to protect “hard won assets.”
The
undercover businessman told Mullin Henry about the plan to bring down a chef
once a year and about possibly having access
to a kitchen.
“Yeah,
that would work,” Mullin Henry said. “The more that you can show is actually happening here, the safer
you are if CRA comes to audit.”
Mullin
Henry said the businessman would need the appearance of a presence in Barbados,
including an office with a phone and
workers. [WORTH A PHONE CALL]
“You
just want to show that there is some type of activity going on there in
Barbados. I think that would be a good compromise. You're bringing your
corporate chef, they work with the local chef, and it doesn't have to be for
that long period, and all of the manuals
and the procedures are seen to come from the Barbados office, even if
they're actually manufactured in Canada.”
‘Creating
a façade’
After
reviewing the hidden camera footage, the former Canadian offshore banker said,
“We're going to have a pretense of
developing your recipes down here. We're going to have the pretense of training
your staff down here.… We're creating a facade. A bit of theatre for CRA to see that there's some action.”
Mullin
Henry declined to be interviewed by CBC News, but Madan defended his advice.
...
In a
followup letter to the CBC, Madan said his proposal was a “valid tax saving
strategy proven in the court of law.”
But Laval University professor André Lareau,
who teaches tax law, said to create a foreign entity “requires employees,
requires producing something and a real business.”
Instead,
what’s being created is “an illusion,”
he said, an attempt to show the tax agency that a foreign business has been
created.
Lareau
said there’s nothing illegitimate about money in a tax haven, though you have
to know what the source of that money is, and you have to declare the income
from it.
But
he said someone like Madan could be
viewed as an accomplice to someone who’s not following the law.
‘Magic
curtain’ approach
The
undercover businessman also met with Canadian
tax lawyer Jonathan Garbutt, who immediately shut down Madan’s ideas.
But
instead, in a meeting recorded with hidden cameras, he proposed the businessman
use his profits to buy an offshore life
insurance policy, a structure he called the “magic curtain.”
“The
magic curtain is something that exists in Canada that works, which is a life
insurance policy,” Garbutt said.
The
plan involved a series of transactions including a loan, bonds, offshore trust
accounts and ultimately using business profits to buy an offshore life insurance policy, which isn’t taxed in Canada. And
all of this would take place in Barbados.
The
structure would ultimately allow the
undercover businessman to avoid paying taxes on his Canadian restaurant profits.
In
Canada there is nothing that makes a structure like this illegal, but there are
provisions that allow the tax
authorities to challenge a structure if they feel it violates the spirit of Canadian tax law.
Laval
professor Lareau questioned whether this plan is really what the legislature
intended when it created the law.
“I
think that wouldn't pass the test of the
spirit of the law,” he said.
Lareau
said the Canada Revenue Agency could disallow the approach, but that the agency
would have the burden of proving that it constituted an abusive arrangement.
“To
me, it's clearly an abuse. But the
agency would have to succeed in convincing a court that it's an abuse.”
In
an interview with CBC, Garbutt said he had done nothing wrong.
“I
love these structures because they’re front-door tax planning. You walk in
through the front door and tell the CRA what they’re doing and they can pound
sand if they try to go after us.”
In a
meeting filmed with hidden cameras, Garbutt said his role as a tax lawyer is to
be the “most devious underhanded son of
a bitch in the room and that’s what you’re paying me for.”
He
later backtracked a bit, saying that he regretted saying “underhanded,” but
stressed that his job as a tax lawyer is to ensure his clients don’t pay one penny more than they are
legally required to.
“Like
I said, they invent better mousetraps, we
invent better mice. That’s the nature of the game.”...
