Canada issued a bulletin last week detailing the existence of a “Pandora’s Box” on offshore tax havens in Canada.
Some have seen the news as an olive branch. Not to Canada itself, but to the United States. The United States has been fighting with Canada over raising tax evasion standards, and Canada has been protesting since Americans hold 50 percent of its savings. Canada now says it will share some of its information on offshore tax havens with the U.S.
The U.S. already shares information with Canada on U.S. financial transactions and transactions held in Canadian jurisdictions, so the idea that Canada will share information on U.S. financial dealings seems somewhat reasonable. But the United States shares information on American financial dealings everywhere except Canada.
The parties aren’t likely to jump right into sharing information. It’s possible they could settle on different ways of sharing information with different countries, or they could agree to cooperate and set new standards.
Prime Minister Justin Trudeau has been quite quiet.
Canadian media said that American government officials had asked Ottawa for information about Canadians who use offshore accounts. The CBC said many details were not yet known about the accounts.
These accounts are complex with different names, bank accounts and reports on the accounts. And the accounts get more complex as the complexity of tax evasion goes up.
A CBC segment aired earlier this week looked at taxpayers with multimillion-dollar offshore accounts in Switzerland, Panama and the Cayman Islands. The report said the deposits originated with trusts and investment companies without a majority shareholder in Canada.
The banks just needed clients for the accounts. Bank executives said it was difficult to find clients in Canada and even easier to find clients in tax havens like the Cayman Islands.
Trudeau has said money raised by Americans working in Canada is not subject to U.S. tax collection. However, with the help of American-based firms, Canadians may now be more readily able to bring their money back home. And with that increased capacity comes more Canadian government money, and therefore more pressure to reduce tax evasion.
Although the Canadian government uses the phrase “the booming economy” to describe its strong economic numbers, the housing market, in particular, has been weak. When this happens, people take time off work to renovate their homes, which is when companies are most vulnerable to lawsuits from their employees and other types of lawsuits from their clients and customers.
If the Canadian government cuts its teeth on revenue from offshore bank accounts, it could generate more revenue for Canadian workers and companies.