A Canadian tax lawyer is defending Barbados and other low tax countries in the wake of recently-leaked information detailing the billions of dollars nationals from that country have stashed away here and in other domiciles.
Bernard Shinder, who noted that Barbados was “the most popular jurisdiction for Canadians to set up an offshore trading corporation”, called recent reports shining a negative spotlight on offshore tax markets like the island “short on facts and long on hysterics”.
“Let me say, at the outset, that many criminals and tax cheats use tax havens to shelter their cash. But for the most part, recent agreements between Canada and so-called tax havens provide for a thorough exchange of information.
Tax cheats and others are finding fewer and fewer havens in which to bank their money,” the international trade and tax consultant wrote in an opinion piece published over the weekend.
“Barbados is the most popular jurisdiction for Canadians to set up an offshore trading corporation. Barbados charges about 2.5 per cent tax as compared to about 26 per cent tax if the income was taxed in Canada. A 23.5-per-cent tax differential is significant where corporate profits are large.
“Not only can such income be sheltered in Barbados at a low-tax rate, the tax treaty between Barbados and Canada provides that such income can be repatriated to Canada tax-free. I have simplified the transaction to make a point. This, again, has been the law of Canada for more than 50 years,” he added.
Shinder said the rationale was “to allow Canadian companies to repatriate foreign profits so that they can be reinvested in Canada”.
“In the US, foreign profits can only be repatriated by paying a 35 per cent tax. This has resulted in more than $1 trillion being held offshore because it can’t come home. Consider what this might have done for the US economy if these funds had been reinvested in the US,” he noted.
The lawyer also said while many people might consider these arrangements to be biased against the rank and file taxpayer, “each taxpayer sips through the same straw when a … (Registered Retirement Savings Plan) is made or interest is earned in a tax-sheltered savings account or when a personal residence is sold tax free”.
“Look no further than your insurance policy as a tax haven instrument. Insurance policies are creditor proof (they can’t be seized by your creditors) and income earned on the money invested to pay your policy is tax exempt. The tax system is riddled with incentives that everyone uses,” he stated. (SC)