Canadian financial crime: The story behind the new crackdown

by Sven Lin, BBC North America correspondent

There has been growing public disgust about tax avoidance by the super-rich and the average Canadian’s shrug-of-the-shoulders attitude to offshore tax havens has fallen. So far the authorities have announced around $20bn of criminal or civil charges against 15 wealthy individuals and organisations that have used them. Last month the federal prosecutor in Toronto sent a memo to Canadian banks warning them about various schemes to evade taxes. And last week the government announced that it was launching an investigation into their possible complicity in hiding the wealth of wealthy Canadians. Staying out of the spotlight Staying out of the spotlight is how the financial world has dealt with the problem of tax evasion for years. And whether wealthy people send their own advisers or not, it is the wealthy who come to the banks asking for advice on the most efficient way to avoid paying tax. So the big Canadian banks, who are navigating the darkest day of their history, are locked in a battle with the 12.5 million citizens of Canada to ensure that the identity of tax cheats will not surface publicly. There are some really aggrieved people from the classes that contribute the most to the economy

Sven Lin, BBC North America correspondent

Montreal battle fuels tax evasion battle If they help wealthy people cheat on taxes, it will also have an impact on the banks’ profits and share prices. The stakes could not be higher. They are eager to make sure that the nation – and the world – do not know about the schemes that have been used to avoid taxes. “My reaction as an investor was: ‘This is really bad, it can’t end well’,” said Michael Stademann, a lawyer who handles tax litigation for the law firm Borden Ladner Gervais LLP. Confidential information can spread through the Canadian financial system like wildfire and the media know exactly what to do with it. “There are some really aggrieved people from the classes that contribute the most to the economy,” Mr Stademann said. Prime suspect Michael Minter – a rich middle-aged man, very well-known in Canada and his native Bahamas, has been top of the list of people in this latest tax evasion crackdown. Michael Minter is regarded as prime suspect Michael Minter is regarded as the prime suspect because of the way that he set up almost 350 offshore companies to receive the money of high-income clients. There were seven broker-dealers who partnered with him, and he maintained he was doing nothing illegal. But the Government says that he “misappropriated money.” It is not clear exactly how Michael Minter is the prime suspect, but it is unlikely that it is for any action he has taken on behalf of clients or Canadian governments in the past. His own self-described research firm has published two books: The Forgiven and the Offshore Avoidance Handbook and an article “Why Tax Deferral Matters”. And he is a regular speaker at tax forums where he drops a few words of advice which can be read by anyone listening: “Cheat on taxes or carry on like that and get caught, but make a fortune. Then the rest of the world will start opening doors.” Win for the system The victory against him is good news for Canada. With a population of just 33 million, people in the millionaire’s club will soon be big targets for the tax authorities in this country and they fear that millions will lose their tax havens. “I like to tell people that no one has been so lucky in their life that they want to turn their back on the system when their kids are going through a divorce or they have a young grandchild,” said a government source. So while some of the most moneyed Canadians are losing their plush homes as the tax authorities settle legal cases against them, the tax system has not been destroyed – at least not yet. One middle-aged Canadian, who simply wanted to be known as Elena, said she lost “tens of thousands of dollars” on a Caribbean scheme which involved keeping her money in some kind of offshore bank account. “I’m just devastated that it has all fallen apart for me like this,” she said. It is not certain how much is in the offshore world. Nor is it clear how much Elena herself owes in taxes. But what she did not realise was that she could not really afford to stay in the Bahamas until the end of the legal battle with the tax authorities and the thousands of dollars she had paid were finally returned to her bank account

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