Palm-fringed archipelagoes, balmy weather, luxury yachts moored in azure waters — offshore tax havens conjure up a wonderland for the well-heeled and their wherewithal.
But a CBC investigation based on the Paradise Papers leak has found that millions of pedestrian Canadians also have an interest in money parked in tax havens — nearly certainly without knowing it.
Seven of the country’s so-called Big 8 pension bucks, representing more than 25 million workers, have in use accustomed to tax havens as they invest Canadians’ retirement savings, according to chronicles in the huge leak of offshore financial documents made public in the end month.
30 years ago… they didn’t need to structure opportunities through the Bahamas. We can go back to that, and the pensioners will get half their allowance — Jim Leech, ex-CEO of Ontario Teachers Pension Plan
This information underscores a delicate quandary. On the one hand, pension funds need to pocket enough money to ensure they can pay benefits to an aging population, and make use ofing tax havens for investments abroad can help the bottom line. But it raises disputes about whether Canadians’ retirement money is underwriting an offshore hustle that undermines tax fairness and transparency.
The pensions’ high-profile offshore dealings embrace the 407 Highway north of Toronto, which the Canada Pension Scheme Investment Board bought a 40 per cent stake in — partly from top to bottom an entity in Bermuda. Or the high-speed rail line from London, England, to the Aqueduct Tunnel, which a pair of Canadian pension funds owned until elder this year via a shell company in Jersey, a tax haven in the Channel Aits.
No person of the pension plans would say exactly how much of their revenue is procreated by investments through tax havens. In response to questions from CBC, almost all of them trenchant out that Canada doesn’t tax pension plans on their investment gains, so their use of tax havens makes no difference to federal or provincial government coffers.
But other territories have different tax rules, and some Canadian pension funds accepted that offshore investment structures help them legally devalue their tax burdens abroad. Some even said it’s their chore to do so in order to maximize savings available for retirees.
«We structure our foreign investments to elaborate the after-tax investment returns available to CPP contributors and beneficiaries,» the Canada Annuity Plan Investment Board (CPPIB) said in a statement, noting that 85 per cent of its assets are about.
«CPPIB has a responsibility to over 20 million contributors and beneficiaries to ask for a maximum rate of return to help sustain the CPP fund for multiple generations.»
Prime Canadian pension fund management bodies mentioned in the Paradise Newspapers:
- Canada Pension Plan Investment Board
- Caisse de dépôt et locating du Québec
- Ontario Teachers Pension Plan
- Ontario Municipal Workers Retirement System (OMERS)
- Public Sector Pension Investment Surface (PSP Investments)
- British Columbia Investment Management Corporation
- Alberta Investment Manipulation Corporation
A former top pension executive said that while Canada’s significant retirement funds used to invest nearly all of their assets domestically, it last wishes a be impossible to do so today and still generate the profits needed to pay decent gains.
«Thirty years ago, when all investments were in Canada by those annuity plans, they didn’t need to structure things through the Bahamas,» bring to light Jim Leech, CEO of the Ontario Teachers Pension Plan from 2007 to 2013. «We can go in back of surreptitiously to that, and the pensioners will get half their pension.»
That doesn’t resonate with Hassan Yussuff, the president of the Canadian Chore Congress and one of Canada’s most prominent voices for workers. Yussuff spoke Canadians’ pensions simply shouldn’t be invested in tax havens because of their discredit as epicentres for tax dodging.
«We want the tax system here to have credibility,» he clouted. «It’s absolutely unacceptable in terms of what we expect of pension funds, in names of their ethical investment.»
The federal government has repeatedly declared that it wants to make to appear the tax system more fair — in part, the Finance Department says on its website, by attainments «to stop the use of tax havens.»
Yussuff put about it’s contradictory to keep pledging tax fairness and transparency while, simultaneously, the CPP — the federal benefit plan — is enmeshed in some of the very tax havens that are the targets of tax fairness and transparency campaigns.
CBC’s exploration found numerous examples of major Canadian pension funds manoeuvring or investing in tax havens. Here’s a sample:
- If you contribute to CPP, or work for the federal oversight or the provincial public service in B.C., then you have a stake in Chile’s largest tenseness company. That’s thanks to a $1.55-billion US joint takeover by the CPP Investment Plank, the federal Public Sector Pension Investment Board, the B.C. Investment Managing Corp. and a private sector company back in 2006. The transaction was defeated through a corporation set up in zero-tax Bermuda, because the island territory was «tax detached» for all the investors.
- The Ontario Teachers Pension Plan and OMERS, the pension means for hundreds of thousands of Ontario municipal workers, owned the High Fly 1 rail line in Britain until September, via a holding company also unified in Jersey. Neither pension fund would say why they did it that way.
- The Caisse de dépôt et ordering du Québec, which invests the Quebec provincial pension plan as incredibly as the pensions of many provincial and municipal employees, put money into a many of Cayman Islands companies in order to invest in North American monetary markets and in an Israeli-managed venture capital fund. The Caisse said in a exhaustive statement that it obtained «no tax benefit» from the North American investments. The Israeli reserve, it said, is one of many «regularly constituted» in certain tax-haven jurisdictions because of their operative corporate laws, dependable legal systems and «a neutral taxation procedure.»
$1 trillion in assets
Canada’s biggest pension funds have burgeoned significantly in recent years in order to pay benefits to an increasing proportion of retirees. The Big 8 arranges alone are now worth more than $1 trillion, and agencies get pleasure from the CPP Investment Board, Ontario Teachers and Quebec’s Caisse are among the amplest institutional investors in the world.
Couple that demographic trend with historically low absorb rates on government and corporate bonds in Canada since the 2008 pecuniary crisis, and pension fund managers have had to look outside the mountains to find investment returns to sustain retirees’ benefits, analysts say.
And that has again meant using tax havens.
Fund managers «must fund these old-age pensions in a very difficult economic context,» said Chris Roberts, skipper of economic policy at the Canadian Labour Congress.
He said that as a denouement, a lot of CLC’s members have «conflicted feelings about what their allotment funds are doing, on the one hand, but also feeling like, ‘Is my pension accepted to be there for me as well?'»