Pandora Papers: ‘This is a Granthshala network of which Canada is a hub’

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The Pandora Papers, the latest leak of offshore financial records, doesn’t seem to have a specific focus on Canada — at least based on what’s been disclosed so far.

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But they nevertheless highlight a Granthshala network of illicit financial flows, of which “Canada is a center,” says James Cohen, executive director of Transparency International’s Canadian chapter.

Nearly 12 million documents from 14 offshore service providers provide further details on how the wealthy can protect their wealth from the prying eyes of tax officials and law enforcement.


The document dump, obtained by the Washington, DC-based International Consortium of Investigative Journalists, a network of journalists and media organizations, follows the Panama Papers and Paradise Papers leaks.

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Here are some key questions about how the wealthy hide their money and what the practice means for Canada:

No. It’s not like that. It is perfectly legal for Canadians to hold financial accounts and assets abroad.

“Canadians and others are allowed to put their money where they want,” says Michael Smart, a professor of economics at the University of Toronto.

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For example, there are plenty of legitimate reasons to own money and assets outside of one’s country of residence, such as doing business and investing abroad or simply owning a vacation home abroad.

But the offshore financial system can be a way to shelter money from tax and law enforcement officials.

Smart says, “It can be very difficult for the Canada Revenue Agency and other national tax authorities…

At issue are both tax evasion and tax avoidance, says André Lareau, a law professor at Université Laval. The first involves breaking the law. Tax avoidance is a vague concept. This typically includes ways to reduce one’s tax burden that are within the letter but not the spirit of the law, Lareau says.

In 1988, Canada added a “general anti-avoidance rule” to the Income Tax Act, which has served as a reference point to draw the line between acceptable strategies to reduce taxation and tax avoidance, which abuses the law. Yes, says Lareau.

The term “offshore” originated from some of the small island countries that have become famous for being tax havens. Some of the financial services providers involved in the Pandora Papers leak, for example, operate in the British Virgin Islands and Cyprus.

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But the latest leak makes it clear that offshore locations are not the only places where money can set up an opaque financial structure.

“There is already a revelation coming out of the Pandora Papers that South Dakota is a very prime jurisdiction for incorporation of anonymous companies,” Cohen says.

And in 2016, the Panama Papers revealed that Canada itself is a tax haven for some. Cohen says the country’s pristine international reputation and loose money laundering regime have made it an especially attractive destination for criminals looking for a place to park their funds.

It takes money to hide your money. Avoiding taxes and investigators usually requires sophisticated legal and tax strategies.

“The root of the problem is the tax consultants,” Lareau told Granthshala News. While Canada has monetary penalties for tax professionals who help clients commit tax fraud, they should introduce a prison sentence for additional detention, they argue.

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Whether or not the account is truly “offshore,” shelter money usually involves setting up complex financial structures that make it difficult to trace who ultimately has what.

“You have Company 123 owned by Company ABC, owned by Company QWR and behind that is finally Bob, who owns 25 percent or more of that company,” Cohen says.

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“Who is Bob? Where did Bob get that money?” he asks.

While financial institutions have an obligation to address that question and verify who they are actually doing business with, it wasn’t until June of this year that Canada introduced a similar policy for others, including tax advisors and real estate agents. Requirements presented.

But even with tighter regulations, it can be difficult for private sector entities to assess who really owns what, Cohen says.

That’s why Canada needs a publicly searchable registry of beneficial ownership, he says.

In 2019, British Columbia created a publicly searchable registry of information about beneficial ownership of land in the province. In the meantime, Quebec is now required to report beneficial ownership in its existing corporate registry.

In its 2021 federal budget, the Liberal government announced $2.1 million to support the creation of a public corporate beneficial ownership registry by 2025. And during the federal election, the Conservatives, the NDP, and the Greens also called for the creation of a similar database to help tackle. Tax dosing and money laundering.

And it’s important that any such registry be publicly available, Cohen says.

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“We can say, ‘Let’s put in more money…

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