Canada's Billion Dollar Rip Off

Canada's Ruling Class Hides Billions Offshore

File This Under; Capitalism is a Criminal Enterprize

I wrote yesterday about the scandal of Offshore Investments by Canada's ruling class in my Red Between the Lines Blog.

And as I predicted Conservative Fianace Critic Monte Solberg was whining that we need more tax breaks for the rich in order to make sure they don't hide their profits offshore in private bank accounts, as reported in the National Pest. (see below). Gee I wish I could say I was a great prognosticator, by commenting in my blog yesterday, but damnit the Tories and the Canadian Taxpayers (sic) Federation are so damn predictable in their knee jerk reaction. To them the solution to everything is Tax Cuts for the rich and Privatization.

The use of offshore banking by Canada's Millionaires and Billionaires, and lets call a spade a spade it's NOT Canadians investing offshore it's THE RULING CLASS, means you and I pay more taxes even after the government has so generously given the corporate capitalists major tax breaks at home. So Monte and the right wing's solution rings hollow.

And it gets better because many of those involved in this criminal enterprize of hidding profits from an already low tax rate for corporations are; Canadas Banks. These are the folks who already have a reputation for money laundering in their offshore banking operations. See my Skimming Kreme for more on Canadian Banks criminal use of offshore banking.

Even more infuriating is the fact that Canada's banks have defered their taxes, again, paying less taxes than they should. Remember that the next time you pay excessive service charges for using their monopoly Interac machines that charge you $1.75 a pop.

The Ruling Class like the Irving Family in the Maritimes makes no bones that as capitalists they should pay NO TAXES, and the old man of the family set up offshore accounts to make sure they didn't. With their Monopoly in New Brunswick they control the lives of the islanders with an old fashioned robber baron paternalism.

"The Mayor of Saint John is defending the city's decision to give Irving Oil a huge tax break. City council voted Monday to approve a deal that would see Irving pay $500,000 annually in property taxes on land where it will build its liquid natural gas terminal. The deal is good for 25 years. The city could have expected as much as $5 million a year in business taxes on that land.
He told council the deal had to be done by midnight Monday or the plant wouldn't be built. McFarlane says he spoke with Kenneth Irving several times over the last few months. "I asked him very clearly, and looked into his eyes, and said, 'Kenneth, you look into my eyes and tell me, if this does not happen, will this facility not be here?'" says McFarlane. "And he very clearly said, 'Yes, it is true.'" Taxpayers aren't so happy about the decision. It sounds like blackmail, says Saint John resident June Garfield. "Billionaires get all the breaks and the ordinary citizen gets nothing," she said. "I'm sure if Mr. Irving doesn't get his own way, there'll be somebody else will be only too willing to come in and we'd have some competition in New Brunswick."
Mayor defends tax deal with Irving CBC March 16, 2005

Its the logic of Capitalism, the capitalist sees himself as the creator of wealth, and since they create the wealth and give us poor suckers our jobs out of the goodness of their hearts and pocket books we should all be grateful and not tax their profits.

Ah thats the logic of neo-classical liberal economics, that the capitalist produces jobs and wealth. Its the logic of the Canadian Taxpayers Federation which is front for these same capitalists as is the Federal Conservative Party. To bad its a big lie, as I point out in my article; It's the Labour Theory of Value, stupid it is labour that produces this wealth not the Capitalist.

And even our very own Prime Minister Paul Martin, has his shipping company registered offshore. So he obviously agree's with Monte even though he will never admit it publicly. But actions always speak louder than poltical speeches or rhetoric.

Remember Trickle Down Economics, or as I like to call them Tinkle On Economics (the capitalist gets the gravy and we get p***ed on), the theory that the more tax breaks given the more the capitalist will invest. Can't forget it can you, its the usual canard of the right. Well since all these Canadian Corporations got their tax breaks for the past decade what did they do with them? Pocket the profits of course.

As the Globe and Mail reported yesterday:"Canada's performance in corporate research during the late 1990s was weaker than earlier believed, a new report concludes. The report, released yesterday, says the increase in the number of Canadian companies conducting research between 1994 and 2001, a period of strong economic growth, was salvaged only by government incentives. Earlier reports had suggested that Canadian companies had been showing more commitment to research during this period. "Much of the apparent activity was simply companies taking advantage of available government money," the document concludes. "There are very few positive stories in the multitude of data presented in this report." The report, called The Demographics of Industrial Research in Canada 1994-2000, was conducted by consultants The Impact Group and paid for by a consortium of federal and provincial governments.

This theft of surplus value and its investment in private bank accounts of the ruling class had a major impact on Canadian manufacturing over the past decade. Had the money been invested back into the Canadian economy as capital investments; R&D, technology upgrades, etc., we would not be facing the decline in manufacturing and it subsequent lay offs as we are now and the resulting decline in so called productivity that Canada has faced for two years now.

Canada's corporations continue to whine for handouts from the State either as tax breaks or as tax credits and investments. I have written about these corporate welfare hand outs to Bombadier, and other Canadian Corporations including those that are American owned like GM.

This is the capitalist economy in the epoch of State Capitalism. Unlike Stalinism or Keynesian Social Democracy, the epoch of Corporate State Capitalism is one which giveth to the corporations and taketh from the workers. The whole gamut of trade agreements that are identified with globalization WTO, NAFTA, FTA, APEC, etc. etc. are symptoms of this epoch of State Capitalism.

Tax Breaks, Tax Credits, Flat Tax initiatives, direct investment, lax regulations in Securities, failure to regulate offshore banking, failure to apply the Tobin Tax , giving Federal tax relief to billionaires like the Bronfmans, all this corporate welfare is symptomatic of state capitalism. Meanwhile not satisfied with workers producing surplus value and then using our taxes to prop up their companies the corporate capitalists continue to whine they need more or we will lose jobs. Hmmm, we are still losing jobs and they are banking their profits in safe havens offshore.

So if this isn't a criminal attempt to avoid paying taxes explain what investment opportunities exist in Barbados, or Luxemburg, or the British Virgin Islands. None, zip, nada. Capital is not being invested for anything more than making more money, hence more capital,(Marx's formula M-C-M) and the fact these are nice vacation spots to sit back in the sun on the beach with a cooler, well thats just one of the perks of watching your money grow. And how much you wanna bet the ruling class also applies for a tax credit for the offshore investment!

And who does Revenue Canada go after to bust for not paying their taxes? Coke dealers! If you are member of the Bronfman family or other members of the Ruling Class they forgive you your taxes.

It must be nice to be rich. Next time some company is about to lay off its workers because it can't get concessions, or tax breaks lets remember where they have hidden their profits.

OFFSHORE TAX HAVENS MORE POPULAR THAN EVER
Statscan Says The Amount Canadian Firms Socked Away Soared To $88-Billion In 2003

By PAUL WALDIE,
Globe and Mail
Tuesday, March 15, 2005

Canadian companies are stashing more money into offshore tax havens than ever, a study indicates.

Between 1990 and 2003, the amount of money Canadian corporations put into tax havens, mainly in the Caribbean, soared to $88-billion from $11-billion, according to a study by Statistics Canada.

Direct investments in these countries increased 18 per cent annually on average. That compared with an annual increase of 8 per cent for investments in the United States and 14 per cent annually for investments in other countries. Tax haven countries "accounted for more than one-fifth of all Canadian direct investment abroad in 2003, double the proportion 13 years earlier," the study said. It added that of the $88-billion, $53-billion ended up in offshore banks.

The most popular tax havens were Barbados, Ireland, Bermuda, the Cayman Islands and the Bahamas.

"This was the first time that we were measuring direct investment abroad in a subgroup of countries which we refer to as offshore financial centres," said François Lavoie, a balance of payments analyst at Statscan.

"The interesting findings were that the amount is important and increasing. [Offshore financial centres] represent now, in 2003, one-fifth of the direct investment abroad."

Mr. Lavoie said the study did not look at motivations for the investments, but he said tax issues were the most likely reason. "We know that these types of countries are characterized by low or zero taxation and moderate to light financial regulation," he said.

Canadian tax officials have raised concerns about the amount of money headed to tax havens. According to a document prepared in 2001, the Canada Revenue Agency estimated that individual Canadians invested $44.1-billion in tax haven countries. That compared with $4.5-billion in 1988.

The Internet has made it easier for individuals and businesses to set up banks and brokerage accounts in far-flung countries famous for their secrecy, said the document, titled "Tax Havens, An Evolving Taxation Issue."

The paper noted that officials are concerned that the secrecy provisions in many countries make it difficult, if not impossible, to get information from a financial institution and collect taxes owing from Canadians.

A study last year by researchers at the University of Quebec said Canada's major banks have used tax havens to avoid paying $10-billion in taxes since 1991. The study found that the banks had a total of 73 subsidiaries in tax haven countries such as Barbados and Cayman Islands.

For example, according to researchers, Bank of Nova Scotia reduced its tax bill in 2003 by $309-million to $784-million because of a "lower average tax rate applicable to subsidiaries and foreign branches."

The Canadian Bankers Association has challenged the study, saying "the underlying premise is entirely unfounded and misleading." The association added that there is nothing wrong with what the banks are doing.

Francis Wade, who runs Can-Offshore Services, a Belize-based company that specializes in offshore banking, said regulations in many countries have been tightened and he questioned Statscan's figures.

"We read these statistics with a grain of salt," Mr. Wade said. He added that most banks in the Caribbean have less than $20-million in total customer deposits and could not accommodate the sums indicated by the report.

The Statscan study also found that, between 1990 and 2003, foreign direct investment in the United States tripled to $160-billion, but rose much faster in other regions.

The United States accounted for 41 per cent of total foreign investment in 2003, compared with 60 per cent in 1990.

Offshore investment

The largest growth in direct Canadian investment in offshore financial centres has been in Barbados, Ireland, Bermuda, the Cayman Islands and the Bahamas. These five centres are now among the top 11 nations with the most Canadian assets.

$11-BILLION: CANADIAN ASSETS INVESTED IN OFFSHORE FINANCIAL CENTRES IN 1990

18%: ANNUAL RATE OF GROWTH IN CANADIAN DIRECT INVESTMENT OFFSHORE (1990-2003)

41%: U.S. SHARE OF CDN. DIRECT INVESTMENT IN 2003, DOWN FROM 61 in 1990.

$88-BILLION: CANADIAN ASSETS INVESTED IN OFFSHORE FINANCIAL CENTRES IN 2003

8%: ANNUAL RATE OF GROWTH IN CANADIAN DIRECT INVESTMENT IN THE U.S. (1990-2003)

$169-BILLION: AMOUNT OF CDN. DIRECT FOREIGN INVESTMENT IN FINANCIAL SECTOR ASSETS

Direct Canadian investment assets in offshore financial centres in 2003.
$million Rank
Barbados 24,690 3
Ireland 18,226 4
Bermuda 10,845 6
Cayman Islands 10,619 8
Bahamas 8,802 11
Switzerland 4,044 18
Singapore 3,735 19
Hong Kong 2,535 22
Malaysia 716 32
Luxembourg 683 33
British Virgin Is. 307 45
Panama 131 64
Netherlands 107 69
Costa Rica 94 74
Cyprus 92 76

Offshore centres ranked, but where data is confidential under the Statistics Act.

Channel Islands

Belize

Mauritius

Saint Lucia

Antigua/Barbuda

Malta

Aruba

Seychelles

Bahrain

Macau

Source: Statistics Canada

$88B FLEES CANADA:
TAXES BLAMED AS INVESTMENT IN OFFSHORE HAVENS SOARS

Eric Beauchesne; with files from Scott Stinson
CanWest News Service; with files from National Post

March 15, 2005

OTTAWA - Canadian direct investment in tax havens and other offshore financial centres has soared eight-fold since 1990 to $88-billion in 2003, says a report that has renewed calls for lower taxes to spur investment in this country.

The Statistics Canada report, released yesterday, rekindled opposition demands for a crackdown on Canadian firms' use of offshore financial centres to avoid paying taxes in Canada.

"From 1990 to 2003, Canadian enterprises invested substantial and growing amounts in countries known as 'Offshore Financial Centres,' many of them in the Caribbean," StatsCan said. "These centres include countries that are often referred to as 'tax havens,' as well as those which have important financial sectors, such as Switzerland, but also Ireland."

The largest increases went into Barbados, Bermuda, the Cayman Islands, the Bahamas and Ireland, the five countries being among the 11 nations with the most Canadian assets.

John Williamson, federal director of the Canadian Taxpayers Federation, said yesterday the inclusion of Ireland among the top five should send Ottawa a message.

"That is a country that Canada could learn so much from. They pursued a policy of lower taxes to stimulate economic growth and have succeeded to the point that not only is their economy strong, but it is attracting Canadian capital," he said.

Mr. Williamson noted the Caribbean countries have long attracted foreign investment, because banking is a cornerstone of their economies, but Ireland has a goods-and-services economy similar to Canada's. "[Ireland] is the one that jumps out on that list.... There's certainly a lesson for the Canadian government in terms of their tax-and-spend policies."

Conservative finance critic Monte Solberg said Canada should follow Ireland's lead and use low taxes to attract investment.

"That's something we should strive for," Mr. Solberg said.

Jack Mintz, president and chief executive of the C.D. Howe Institute, said the StatsCan study underscores the reality that "we're not as attractive enough as a country for foreign investment, and that's a concern."

Mr. Mintz said it is not suprising Canadian investment in tax havens has jumped in recent years, given that Canada has one of the highest corporate tax rates among industrialized countries.

"We have a significant issue that we have to deal with on the tax side to make Canada more attractive," he said. "We've actually created a policy disadvantage for investment in Canada."

The report also brought charges that Ottawa must follow through on promises to close tax loopholes that allow such high levels of Canadian investment in such countries as Barbados.

Judy Wasylycia-Leis, the NDP finance critic, said the Liberal government "has to start taking seriously its commitment to shut down tax havens, because they result in higher taxes for Canadians."

However, Finance Minister Ralph Goodale recently said that a "consensus among all countries" would be needed to shoot down tax havens.

The International Monetary Fund defines offshore financial centres as jurisdictions that have a large number of foreign-controlled financial institutions where most transactions are initiated abroad; have assets and liabilities that are out of proportion to its economy and low or zero taxation; and have loose financial regulations and banking secrecy.

Francois Lavoie, author of the Statistics Canada study, said it is based on investments reported by firms but added he "cannot comment if these are legitimate investments or not."

They mostly are investments in financial assets but, depending on how the investment is structured, that could include investments in ships or buildings, he said.

Canada Steamship Lines, formerly owned by Prime Minister Paul Martin, who has now transferred ownership to his sons, has registered ships offshore.

An IMF background paper notes that international companies route activities through low- tax offshore OFCs to minimize their total tax bill ... moving onshore profits to low-tax regimes.

More than one-fifth of all Canadian direct investment abroad in 2003, or more than 20 cents of every dollar, went into offshore financial centres, double the proportion 13 years earlier, the report said.

In contrast, the share of direct Canadian investment going to the United States, Canada's main economic partner, shrunk over that time, it said. Direct investment mainly serves to finance the creation of new enterprises or the acquisition of existing ones.
© National Post 2005