MEASURES INTRODUCED IN THE BUDGET
Preventing banks from creating “artificial losses.”
The budget proposes strengthening existing anti-avoidance rules to prevent banks and financial institutions from using share repurchase transactions with subsidiaries to create losses on paper in order to gain a “tax advantage.”
Enhancing tax reporting requirements for trust funds,
such as the two secret $60 million Cayman Islands trust that the Star reported were used by former Senator Leo Kolber, his son Jonathan, and Liberal Party chief fundraiser Stephen Bronfman and his father Charles for over 20 years.
Domestic and offshore trusts with Canadian connections will have to report “the identity of all trustees, beneficiaries and settlors” annually starting in 2021. Trusts will also have to report the identity of anyone who can “exert control” over a trustee. If a trust knowingly fails to file a return, a penalty of 5 per cent of the value of the trust’s assets would apply — a fine that could run into the millions for large trust funds.
Strengthening rules for limited partnerships
(LPs), a type of business structure the Star exposed in January 2017. The Canada Papers investigation showed how LPs are prone to abuse by foreigners seeking to “snow wash” their money through Canada. New rules will “prevent taxpayers from obtaining unintended tax advantages through the use of complex partnership structures.”
Cracking down on tax-free
corporate distributions to foreigners, a method used to play Canada’s tax rules off those in other countries to evade paying taxes in either place. In the Canada Papers series, the Star detailed how a Quebec numbered company used this technique to hide at least $3.1 million (U.S.) from three South American governments.
Increasing ownership transparency
for numbered companies and shell corporations, which have been permitted to carry out large transactions without disclosing their owners. The Star has reported extensively on how transparency would allow tax authorities to determine the real people behind paper businesses that launder money and evade tax.
The budget also clarified Ottawa’s plan
to clamp down on investment income through private corporations. This reform, first revealed by the Star last July, sparked a fierce backlash among small business owners. New details specify that the changes would only target “wealthy corporate owners (who) can gain significant tax advantages by holding corporate income inside their corporation for personal savings purposes.”