Tag Archives: Barbados Canada tax treaties

Canada-Barbados tax treaty costs Canada billions in lost taxes

canada_barbados_flag

submitted by Taxing Stuff!

Examples of tax treaty reality: Every year Canadian “investors” send $40-70 billion to Barbados, the equivalent of over $140,000 for every man, woman and child, ostensibly as Foreign Direct Investment (FDI), but most of it doesn’t stay in Barbados to build companies or jobs. Despite massive injections of “investment” into Barbados from Canada that is equivalent to six or more times the GDP of Barbados, the per capita GDP in Barbados is half that of Canada or the US.

There is no “brotherhood” here where two countries agree to invest the same amount in each other: In contrast to Canadian-US FDI exchange of approximately one dollar matched by each country, for every dollar of Canadian FDI to Barbados, Barbados sends a penny of FDI back. Under the terms and transparency of the Canada-Barbados Tax Treaty, Canada lost $1.5- 2.5 billion in taxes last year. Multiply this by numerous tax treaties with tax havens, and multiply it again by the fact that many of these treaties are decades old.

Advertisements

5 Comments

Filed under Barbados, Canada

Canadian Parliament to re-examine Barbados ‘tax-haven’

Barbados has no Integrity Legislation, no Freedom of Information, no Conflicts of Interest Rules

We stumbled upon an article in yesterday’s Nation that proves all old can be new again. It must have been a slow day in the news room because the news article TAX ATTACK is based on a blog entry from last August and is marketed as new news.

We don’t doubt that much of the Canadian doubts about Barbados and other “Tax Havens” has to do with our lack of proper regulations and laws respecting Integrity Legislation, Freedom of Information and Conflicts of Interest. How can the Canadian Government protect its citizens if offshore banking centres like Barbados do not have the same controls, rules and oversight as Canadian banks?

There is no secret why Canadian and other nation’s banks like Barbados: our “island time” slackness extends to the rules. The Canadian and European banks can get away with things in Barbados that they wouldn’t dare do ‘over ‘home. Canadian tax law permits money to flow through Barbados in many billions – but without any concommitant requirement for ITAL. (ITAL = Integrity, Transparency and Accountability Legislation)

ITAL was promised five years ago by the newly elected DLP government – but they lied.

Here’s a quote from the real story at the original blog source and the link where you can read it for yourself. How does this impact Barbados? That’s easy: tourism is in trouble and if Canada makes offshore investing difficult for Canadians, you just watch how things go ’bout hey!

“A growing share of Canada’s investment overseas is being channeled by Canadian banks into tax havens.”

“The finance and insurance sector now accounts for over 51% of Canada’s total direct investment overseas, more than double its share from 1987, more evidence that a large share of this money is going overseas to avoid taxes.   The Harper government has lauded Canada’s growing investment overseas, claiming it shows looser foreign investment rules (which allowed numerous takeovers of Canadian industry) have been beneficial, but the actual figures show the reality is quite different.  A large and growing share of this money isn’t going into real capital investments that could ultimately benefit people overseas or in Canada; it’s going into tax avoidance that benefits a wealthy few at the expense of the large majority in Canada and around the world.”

… from the August 16, 2012 Progressive Economics blog by Toby Sanger: Canadian banks use of tax havens keeps growing

7 Comments

Filed under Barbados, Business & Banking, Economy, Offshore Investments

Canadian tax decision should spur Barbados to ease up residency procedures

Garron Barbados Trust case has frightening implications for Bajan offshore industry

by One Who Knows

An April 12, 2012 decision by Canada’s Supreme Court is putting the pressure on Barbados. The decision changes everything for Canadian trusts residing in Barbados. Many Canadian-controlled trusts will now be taxable in Canada at Canadian rates… and if that is the case then what is the use of having the trusts in Barbados or having the annual meeting on the beach at the Bridgetown Hilton?

Barbados and other Caribbean offshore banking centres rely heavily upon favourable tax laws from Canada, Britain and the USA. As our Prime Minister is so fond of saying: Barbados is not a tax ‘haven’, we are a legitimate financial and corporate centre. There’s a difference you know – but it is a difference that the Canadian government is increasingly unsympathetic to.

The Canadian government is aggressively pursuing a policy of hunting down potential tax revenues that have been ‘missing’ offshore and Barbados is squarely in the tax-haven gunsights.

It’s all about residency… so is Barbados willing to expedite residency for worthy offshore investors?

Whether true or not, Barbados has a reputation for being a difficult country to deal with in terms of immigration, residency and citizenship. Now that Canada has set new rules that threaten the health of our offshore financial and corporate industry, can Barbados adapt quickly enough to keep the trust clients who will soon be moving out?

Offshore trusts can still fall within Canada’s tax net

On April 12, a new landmark was established in the world of tax. It’ll provide guidance to taxpayers for years to come. I’m talking about a Supreme Court of Canada (SCC) decision in a case known in tax circles as the Garron case.

One of the most fundamental questions that every government must ask is this: Who should be liable to pay tax? Most governments have adopted the same answer to the question: If you reside in a country, you should pay tax there. (The U.S. is a rare exception where individuals are taxed if they are citizens, regardless of where they live. Oh, and the U.S. also taxes those who reside there.)

The common principle is that a person who derives economic and social benefit from living in a place should owe an economic allegiance to that place. And so, Canada – like most countries – taxes based on residency.

The problem? Determining whether you’re resident in Canada for tax purposes can be tough because it’s generally a question of fact and subject to the interpretation of the Canada Revenue Agency (CRA) or the courts (with some rare exceptions where certain people are deemed to be resident here).

The case

Determining residency is even tougher when we’re talking about an entity that isn’t a person with a family and a home to live in. What if you’re a corporation? Or a trust? The Garron case, formally referred to as Fundy Settlement v. Canada, 2012 SCC 14, is the story of two family trusts that purported to be resident in Barbados, not Canada, and therefore claimed to escape the Canadian tax net.

The trustee of the trusts is St. Michael Trust Corp., resident in Barbados. The beneficiaries of the trusts are residents of Canada. The trusts sold shares in two Ontario corporations and realized substantial capital gains in the process. The purchaser was required to withhold and remit taxes to the Canadian government on account of these capital gains – to the tune of $152-million. Continue reading

Comments Off on Canadian tax decision should spur Barbados to ease up residency procedures

Filed under Barbados, Canada, Offshore Investments

Canada probing Barbados Offshore Investment tax losses

Largest Canadian Labour Union calls Barbados “Tax Haven” a “problem”

An article at the Toronto Sun news agency says that a Canadian House of Commons committee recently began probing offshore accounts and tax evasion. Some Canadians are concerned that Canada’s government is “missing out on billions in potential revenue” because of low tax countries. The article names Barbados, Bahamas and the Cayman Islands.

“I was really struck to the extent to which this trend seems to be increasing when we were assured it was less of a problem… This money is not going into investing in real activities and in growing the (Canadian) economy.”

…Toby Sanger, Canadian Union of Public Employees CUPE senior economist. CUPE has almost 600,000 members and is Canada’s largest workers’ union.

This is serious business for Barbados because our national economy and well being are highly dependent upon that offshore investment from Canada. Not only that, our tourism industry is also closely linked with the offshore banking and investment sector. Many Canadians and other tourists who head for Barbados in the winter are coming for their “annual shareholders meeting” that just happens to be scheduled every year in the middle of the coldest winter months.

And don’t kid yourself that it’s about all offshore jurisdictions: Barbados is a big big player in Canadians’ offshore tax strategies. I once heard it said that Barbados is the #1 Caribbean country for Canadian offshore banking and companies. I don’t know if that is still true, but Barbados is big enough that we are squarely in the sights of those who want to curtail the ability of Canadians to pay lower tax rates.

All Hands on Deck!

The Toronto Sun article seems to be a balanced piece that gives both sides of the Canadian debate. There is a side that says offshore banking and corporate centres like Barbados actually benefit the Canadian economy by allowing Canadian companies to be competitive in the world markets.

The danger for Barbados is that in bad times governments can get focused only upon revenues and lose sight of the big picture.

As we’ve seen occasionally in Barbados, governments can raise taxes too much and ‘kill the goose’. Some Canadians want their government to restrict access to offshore banking centres like Barbados, and don’t realize this would harm Canadian industry in the long run.

Let’s hope that our government acts decisively and swiftly to convince the Canadian Government, tax authorities and Canadians in general that both countries greatly benefit from our long standing relationship and the agreements that allow both Canada and Barbados to prosper in the world economy. We are both lesser without each other.

Further Reading

Please read the article at the Toronto Sun, but we’ll reprint it here because sometimes articles go missing in cyberspace and then we have nothing to support our fair commentary. Continue reading

7 Comments

Filed under Barbados, Barbados Tourism, Canada, Economy, Offshore Investments