Liberal brand battered by ‘Paradise Papers’

The Canadian Press
Jordan Press

OTTAWA–The Trudeau government’s politically-bruised promise to ensure “tax fairness” for the middle class took another beating yesterday amid unfolding revelations about the widespread and perfectly legal practice among ultra-wealthy Canadians of harbouring cash in offshore tax havens.
Included among the 13.4 million leaked documents, dubbed the “Paradise Papers,” were the names of former Liberal prime minister Jean Chrétien and top party fundraiser Stephen Bronfman–the mere mention of whom gave fresh ammunition for the opposition to accuse Prime Minister Justin Trudeau of leading an ethically-challenged government.
Neither the Canada Revenue Agency nor any court has determined that any of the Canadians identified in the documents did anything wrong, and both Bronfman and Chrétien denied any involvement in offshore tax avoidance schemes.
Still, Conservative leader Andrew Scheer branded Trudeau a hypocrite for aggressively seeking to end tax advantages for small businesses while doing next to nothing to crack down on complicated tax haven schemes used by the super-rich.
Guy Caron, the NDP point man in the Commons, joined in the fray, accusing the CRA of always letting the “big fish” go when it comes to tax evasion.
Trudeau refused to talk about any specific cases mentioned in the documents but vowed to investigate Canadian connections.
“We are fully committed to fighting evasion and tax avoidance,” he told the Commons during question period.
“I will let individuals comment on their own situations but in regards to the ‘Paradise Papers,’ the CRA is reviewing links to Canadian entities and will take every appropriate action,” Trudeau noted.
The details, released by members of the International Consortium of Investigative Journalists, mark the largest-ever leak of tax haven documents involving Canadians.
The documents–client records from offshore law firm Appleby, as well as some records from offshore corporate services firms Estera and Asiaciti Trust–contain the names of more than 3,000 Canadians.
According to the Toronto Star and CBC/Radio Canada, records suggest Bronfman and his family’s Montreal-based investment company, Claridge Inc., were linked to an offshore trust in the Cayman Islands.
The report raised questions about a complicated series of transactions involving people with Liberal party ties.
In a statement, Bronfman said he made a single loan on an arm’s-length, fully commercial basis some 25 years ago to the trust that was repaid five months later, a transaction that was fully in compliance with Canadian law.
Bronfman, a close personal friend of Trudeau, said he has never funded nor used offshore trusts, and that all his Canadian trusts have paid all federal taxes on their income.
“Stephen Bronfman is a proud Canadian and has always fully complied with all legal requirements, including with respect to taxes,” the statement said.
Also among the leaked documents was a register of investors in Madagascar Oil that lists Chrétien as having received 100,000 stock options.
In a brief statement of his own, Chrétien said Madagascar Oil was a client of Heenan Blaikie, a now-defunct Canadian law firm.
As a lawyer with the firm, Chrétien said he did some work for Madagascar Oil but all fees were billed by and paid to the law firm itself.
“I never received any share options and I never had a bank account outside Canada,” Chrétien asserted.
“Any news report that suggests I have or ever had or was associated in any way with any offshore account is false.”
Tax avoidance measures involving offshore trusts are legal, provided the trust is genuinely managed offshore and that Canadian taxes are paid on any Canadian contributions.
And there may be other legitimate reasons for setting up an offshore account, including if you’re a contractor doing work in a particular country.
“In setting up an offshore, you’re not ‘getting away with not paying your fair share of taxes,'” said Ian Lee, an assistant business professor at Carleton University in Ottawa.
“Offshore trusts are not illegal,” he stressed. “What’s illegal about offshore trusts is to not declare it to CRA.”
The “Paradise Papers” are just the latest revelation to tarnish the Trudeau government’s self-proclaimed title as champion of the middle class.
A plan to end put an end to wealthy individuals using incorporation to reduce their tax burden was widely-perceived as an attack on small business owners, forcing the government to adjust or drop the proposals.
The government also has been forced to disown a CRA directive that employee discounts, including those given to minimum-wage workers in the retail sector, are considered taxable benefits.
And it still is struggling to explain why diabetics suddenly are finding themselves ineligible for a long-standing disability tax credit.