Politics & Policy

The Tax and Political Lessons from the ‘Paradise Papers’

The “Paradise Papers” scandal may not be making a big splash in the United States, but north of the border, the Canadian press is in a frenzy. Stephen Bronfman, one of the biggest fundraisers for Liberal Prime Minister Justin Trudeau, is accused of moving money through complicated financial transactions to avoid paying Canadian taxes.

From the Toronto Star’s investigation:

Internal email correspondence and financial records in the Kolber trusts appear to show evidence of bogus records to hide payments, false invoicing and six-figure gifts to avoid paying tax, raising red flags for experts consulted by the Star and CBC/Radio-Canada.

To remedy tax concerns over the years, the Bronfman and Kolber advisers kept two sets of books, opened shell companies in tax havens including Nevada and the British Virgin Islands and created other offshore trusts, working the laws of three different countries to circumvent taxes, the records appear to show.

“This definitely merits an audit by the Canada Revenue Agency,” says Denis Meunier, former director general of compliance at the CRA…

Grayson McCouch, a trust expert at the University of Florida, said managers of the Kolber trusts attempted to “circumvent” tax liability and entered into “abusive transactions” that appear to have violated U.S. tax law.

“When you see a pattern of intentional recharacterizations or mischaracterizations, or intentional concealments of where funds are coming from or where they’re going to . . . there are lots of red flags and I would expect tax authorities specifically to be very interested in following up,” he said in an interview.

The lawyer for Trudeau’s mega-donor insists no crime or wrongdoing occurred.

The allegations are vigorously denied by Montreal lawyer William Brock, representing the Kolber and Bronfman families.

“My clients have always acted properly and ethically, including fully complying with all applicable laws and requirements,” he wrote in a statement to the Star and the CBC.

“Suggestion of false documentation, fraud, ‘disguised’ conduct, tax evasion or similar conduct is false and a distortion of the facts.”

A big part of Trudeau’s platform and political philosophy stems from the idea that Canada’s rich aren’t paying their fair share in taxes. Back in March, he said “it is absolutely unacceptable that there be people not paying their fair share of taxes” and declared his government had put another $440 million into the Canada Revenue Agency “to ensure we are doing a better job of … going out and getting tax avoiders and tax frauders.”

The assessment from paper’s editorial board is scathing:

The revelations contained in the Paradise Papers that key Liberal insiders and fundraisers have made extensive use of questionable tax avoidance measures simply add more fuel to the ongoing questions about [Finance Minister Bill] Morneau’s personal finances and those of several of his cabinet colleagues.

These inevitably reinforce the impression that this government is out of touch with the concerns of ordinary Canadians – or worse, in league with those who would rig the game in their own self-interest. The Paradise Papers feed the impression that the odds are stacked, the rich play by a different set of rules and government is happy to keep it that way.

Conservatives and cynics will be less surprised that some of the loudest voices calling for higher taxes are among those who have already taken steps to ensure they won’t actually be paying them.

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