A new report from the Toronto Star sheds light on how Canada’s banks are using offshore accounts to reduce their tax rate, effectively paying the lowest tax rate in G7 countries.
As highlighted by the report, large corporations are reducing their taxes by using unfair tax loopholes in a process that’s been going on for decades.
So how are Canadian banks paying so little in taxes? The Toronto Star reports that part of the reason is that banks are shifting money to lower tax rate jurisdictions:
The Big Five earn the vast majority of their revenue in Canada and the U.S., which has a higher corporate tax rate than Canada. Yet in their financial statements to investors, the banks declare that lower tax rates in their “international operations” helped them reduce their taxes by $6.5 billion over the past six years.
The process is simple – Canadian banks book their profit through international subsidiaries in low tax countries, places where they have almost no employees.
Many of these tax haven subsidiaries have tiny offices, but account for massive profits. TD, for instance, has a subsidiary in Ireland that is valued at over $1 billion, even though TD Ireland employed only two of the bank’s more than 85,000 staff.
Canadian banks have subsidiaries in Barbados (0.25 — 2.5 per cent corporate income tax), the Cayman Islands (0 per cent), Ireland (12.5 per cent), Bahamas (0 per cent), Bermuda (0 per cent) and Luxembourg (starts at 19 per cent, but can be much lower as many multinational companies negotiate special tax deals).
It’s a troubling pattern employed by Canada’s largest corporations to reduce their tax bill, denying Canadians billions of dollars that could be used for infrastructure, doctors and combating climate change.
This issue needs to be fixed. We must act to close down tax loopholes and demand they pay for the government and public services that make their businesses possible. If you agree, add your name to our petition to demand the Federal government close corporate tax loopholes.