OECD hopes reforms will end era of tax avoidance

An unprecedented international collaboration on tax reform that recently unveiled sweeping plans to crack down on aggressive tax planning by multinational companies has the potential of becoming the biggest shake-up in international tax rules in nearly a century, according to tax professionals.

Endorsed by G20 finance ministers and leaders, the ambitious proposals by the Paris-based Organisation for Economic Co-operation and Development (OECD) aims to close loopholes, increase transparency to assist tax authorities in risk assessments, and restrict the use of tax havens to curb many international tax planning strategies. The plan, known as the Base Erosion and Profit Shifting (BEPS) project, lists 15 specific actions intended to establish coherent rules for corporate income taxation, prevent tax treaty abuse, tackle the tax challenged posed by the digital economy, and amend the world’s 3,000 bilateral tax treaties through a multilateral instrument.

The initiative mandated by the G20 was launched two years ago in the wake of intense political scrutiny and public outcry over the likes of Apple Inc., Google Inc., and Starbucks Coffee Company moving billions of dollars of profits out of higher-tax countries into low or no-tax jurisdictions. The OECD conservatively estimates that profit shifting leads to annual general losses ranging between four per cent and 10 per cent of global corporate tax revenues, or the equivalent between US$100 billion and $240 billion a year.

The confidence citizens have in the fairness of the tax system at large is at stake when there is an overriding perception that multinationals can avoid their tax liability through tax planning, Pascal Saint-Amans, the OECD’s tax director who spearheaded the reform program, told an audience attending a tax conference in Montreal. The OECD proposals are an attempt to ensure that multinationals are taxed where economic activities take place and where value is created, added Saint-Amans.

“The tax system became illegitimate, incomprehensible,” remarked Saint-Amans. “There was a need to make some sense into something that no longer had any. The OECD believes in the virtues of globalization but globalization only can work if there are some sort of regulations. We need to have a change of paradigm in international tax, and I believe that we made so much progress that we can speak about a paradigm change. This is a new era.”

beps timelineThe OECD deserves credit for developing in such a short timeframe a “meaningful and substantive” comprehensive action plan that attempts to establish fair ground rules of competition, said Gabe Hayos, CPA Canada’s vice-president of taxation. “Anytime you come up with something new like this, there will be different perspectives as to whether it is good or it will be a hindrance to trade but I think they did an excellent job for a very difficult initiative,” Hayos told The Bottom Line.

Now the really hard work begins, admits Saint-Amans. The OECD does not have the power to set laws or sign tax treaties so its effectiveness hinges on their widespread and consistent implementation by governments through tax treaties and domestic law, added Saint-Amans. Business is sceptical. Less than a quarter of business leaders believe there will be a global agreement on BEPS, according to a recent survey conducted by Grant Thornton. As points out Hayos, it’s tough enough to reach a bilateral agreement, let alone a multilateral agreement. Yet Hayos is cautiously optimistic. “There’s no question that there is reason to be sceptical because we have never done it before but BEPS itself is an evolution,” said Hayos, who hosted the BEPS discourse at the Montreal TaxCOOP conference. “There will be certain things that will be easier to agree on and they will be the first things that will be included in the multilateral agreement, and then depending on it success there may be other things that are slowly agreed to.”

Some countries, including Australia and the United Kingdom, are already forging ahead and have announced that they will introduce legislation that covers some of the BEPS actions. Other countries like the U.S. have expressed reservations. While it is planning to bring in country-by-country reporting, which will require companies to reveal where they really earn their revenues, hold their assets, employ people, and book their profits, many of the OECD reforms will unlikely – if ever — be adopted before next year’s Presidential election.

The new federal government has yet to provide indications on where it stands on the OECD’s recommendations, though tax professionals believe that Canada will take steps in matters such as country-by-country reporting, interest deductibility reductions, transfer pricing, and treaty shopping. “If the BEPS initiative progresses the way that it is theoretically intended, I think that Canada may well make some changes to the effect that it will have an impact on its multinationals,” said Hayos. “Hopefully not competitively hurting them but making sure that the playing field is level for all of the countries involved.”

BEPS 15 Action PointsCanada should be reluctant, if not wary, before proceeding with many of the BEPS recommendations unless its most significant trading partners, particularly the United States, have enacted comparable amendments, warned Drew Morier, an international tax lawyer with Osler, Hoskin & Harcourt LLP in Toronto. The drive to reach consensus, coupled with the “extremely ambitious” timeframe, has led to many ambiguous recommendations that will invariably be subject to a host of interpretations which may lead countries to draft or interpret the recommendations in a self-serving manner. That in turn may lead to a significant increase in international tax disputes and compliance costs in Canada and around the world, said Morier.

“If you have countries who are enacting rules which they think are responsive to the recommendations but which end up asserting a right to tax more income of multinationals in that country, and if other countries are doing the same thing – then you end up with an increased possibility of more than one country asserting the right to tax the same amount of income,” explained Morier. “That could lead to more cross-border disputes between taxpayers and tax authorities in different countries over who does ultimately have the right to tax that income.”

It doesn’t help that the OECD altogether avoided discussing the most difficult issue in international tax matters — the allocation of taxing revenue between source and residence countries, added Morier. The consensus reached by OECD members therefore likely masks significant differences between countries over who will collect more tax revenue as a result of the proposals, said Morier.

Business in the meantime are caught in the middle, and are concerned. A survey conducted by Thomson Reuters reveals that slightly more than half of multinationals are “proactively” preparing for BEPS while a third are waiting for the OECD project to be completely finalised. However the survey also found that 59 per cent of European-based corporations companies are focused on BEPS planning compared to 48 per cent in the Americas and the Asia Pacific. Another survey reveals that 74 per cent of businesses would welcome guidance by tax authorities. None of which surprises Morier, who said that Osler’s clients are proceeding cautiously, albeit with a “very strong sense” that their international tax planning now has to take the OECD’s initiatives into account. All of which means that tax professionals have their work cut out.

“There is a greater need for tax professionals to stay informed about what’s happening outside of Canada,” remarked Morier. “There is also a greater need for tax professionals in Canada to exercise more judgment about whether something that a client is doing is not only legal but appropriate taking into account the broader international tax perspective.”

Tax competition stirs controversy

Barely a month after the European Commission ruled that Starbucks Corp. and Fiat Chrysler Automobiles NV benefited from illegal tax deals from the Dutch and Luxembourg governments, cross-border tax avoidance will be the subject of yet more intense scrutiny after European Union lawmakers decided recently to quiz 11 multinational corporations over sweet-heart tax deals with governments.

Sophisticated tax avoidance schemes, under increasing political scrutiny as the likes of Apple Inc., Google Inc., and Wal-Mart Stores Inc. shift billions of dollars of profits out of higher-tax countries into low or no-tax jurisdictions, comes with a hefty price. The Organisation for Economic Co-operation and Development (OECD) conservatively estimates that profit shifting costs the world between US$100 billion and $240 billion in lost tax revenues. Another study revealed that the 500 largest U.S. companies hold more than US$2.1 trillion in accumulated profits offshore to avoid U.S. taxes, and would collectively owe approximately US$620 billion in U.S. taxes if they repatriated the funds.

While multinationals are under growing public criticism for using tax avoidance strategies such as assigning valuable patent rights to shell companies based in tax havens or receiving interest deductions for payments made to their own subsidiaries, tax competition too is responsible for the dire situation, said Peter Dietsch, a professor at the Université de Montréal and author “Catching Capital – The Ethics of Tax Competition.” Tax competition, a phenomena that has really taken off over the past two decades, occurs when countries strategically design fiscal policy to attract capital from abroad.

Tax on corporate profitsA controversial practice, tax competition undermines fiscal autonomy which holds that states should be able to decide for themselves the size of the state relative to its gross domestic product and the level of distribution, added Dietsch. Some countries have adopted tax competition to attract portfolio capital from abroad, using bank secrecy as an enticement to avoid paying taxes. Others have attempted to attract paper profits of multinationals by encouraging strategies such as transfer pricing or inter-company loans to transfer profits from one jurisdiction to another like Luxembourg. “Both the tax evading individual and the tax avoidance multinational are free riding on the provision of public goods and public infrastructure where they reside or produce,” asserted Dietsch, who added that there are other countries, with Ireland being the best example, who use a different tack and try to “lure” and entice multinationals to set up shop in their country in exchange for low corporate tax rates.

“Tax competition undermines fiscal autonomy because it puts a downward pressure on the tax rates so different countries are affected differently,” Dietsch told an audience of some 200 attending a conference in Montreal that examined the issue of tax competition. “Developed countries can usually compensate by shifting the burden onto less mobile tax like work and consumption and thereby protect their revenues but see rising inequality. Now developing countries are even in a worse situation because they see both lower revenues and higher inequality. So for them both of the aspects of fiscal autonomy are compromised.”

Tax on corporate profits IIExacerbating the issues that surround tax competition is the lack of transparency that shrouds it, according to Allison Christians, a tax law professor at McGill University. While multinationals, the host country “who tries to lure the multinational by any means necessary which can include a nice reduction in tax,” and tax havens are perceived to be the only culprits behind tax competition, there are other players behind the scenes, including the “pushers of capital” who are looking to send capital into countries with low tax rates as well as “agents of the government” who make millions of decisions every year without preying eyes.

“There’s a lot more to this global system that we cannot see,” remarked Christians. “A lot of tax competition plays out in ways that aren’t transparent so we are all trying to figure out who’s doing what to who and when.”

While there is some information, such as regulatory disclosures, that business do make available to the public, much remains concealed, added Christians. The global structures for most multinationals remain opaque as are its intra-firm contracts. Information about tax returns, the positions it has taken, and the reasons behind the decision-making process when filing tax returns are off-limits. Public sector officials are no better. Private rulings between governments and multinationals are veiled as are a “massive amount” of global international tax rules being interpreted in closed forums by competent authorities. “There is a whole world developing around tax treaty arbitration that none of us even knows what goes on because we aren’t even able to know that there is a dispute, and who is arguing and who is judging,” pointed out Christians, who is calling for greater transparency by all actors involved in international tax matters.

Elise Bean, a former staff director and chief counsel in the U.S. Governmental Affairs Permanent Subcommittee on Investigations, can attest to the secrecy behind tax matters. Bean, who headed inquiries into offshore tax avoidance by Apple, Microsoft Corp, and Caterpillar Inc. as well tax shelter sales by professional firms, including KPMG, said simply finding out the facts while conducting investigations turned into a real battle, requiring subpoena after subpoena, interview after interview. “To get information, you have to fight like hell so don’t tell me tax competition is a healthy market force when you can’t find out at all what’s going on,” Bean told the audience.

Ambitious initiatives like the OECD’s base erosion and profit shifting project is a step in the right direction, added Bean. The OECD recently published proposals for global reform of international tax rules to thwart aggressive tax planning by multinational companies. One of its proposals calls for country-by-country reporting, which will require companies to reveal where they really earn their revenues, hold their assets, employ people, and book their profits. “For the first time, beginning in 2018, we’re going to be able to get information by multinational corporations about where their economic activity is, and where they are actually paying taxes,” noted Bean.

But much more can be done, said Brian Arnold, senior advisor to the Canadian Tax Foundation. The co-editor of the Bulletin for International Taxation suggests public naming and shaming may be a partial solution. Tougher legislation to “alter the risk-reward analysis” that taxpayers conduct when deciding whether to engage in tax avoidance, better enforcement by tax authorities, and courts who “purposively view transactions realistically” would go a long way to controlling tax avoidance, added Arnold. “If you want multinationals and wealthy individuals to pay more tax, the government has the means that are available to make them do that,” said Arnold. “They are the ones who draft and pass legislation, or not, as the case may be. They are the ones who appoint judges. They are the ones that provide resources for tax administration and justice. So if you want to blame somebody, blame the governments. They are not acting to deal with this problem.”

It might however be time to think outside the box, suggested Tassos Lagios, the managing partner of the accounting and advisory group Richter. Perhaps the solution to the conundrums that tax competition pose is to forget about taxing corporations, said Lagios. “Unfortunately business has changed so significantly over the last 10 to 20 years that tax laws have not adapted quick enough to address this, and therefore creating this conflict,” said Lagios.

In the meantime, however, countries are grappling with the dilemmas forged by tax competition. Germany and other larger European nations cannot afford to lower tax rates, said Katharina Becker, head of the International Tax Division of the Federal Academy of Finance in the Federal Ministry of Finance in Berlin. “In Europe we have smaller countries that favour tax competition because they benefit from it while larger countries favour tax harmonization,” said Becker. “We haven’t come to an agreement in Europe, and I don’t see a compromise in the near future.”

Ambitious international effort to rewrite tax rules at risk

An ambitious international effort calling for a coordinated approach to rewrite global tax rules over profit shifting risks being undermined by the number of growing countries that are unilaterally introducing significant tax reforms, warn tax experts.

The Paris-based Organisation for Economic Co-operation and Development (OECD), backed by the G20 Finance Ministers, proposed in July 2013 a sweeping series of proposals that take aim at aggressive international tax planning by multinational companies in the wake of intense political scrutiny and public outcry over the likes of Apple Inc., Google Inc. and Starbucks moving billions of profits out of higher-tax countries into low or no-tax jurisdictions.

The plan, known as Base Erosion Profit Shifting (BEPS), lists 15 specific actions that will attempt to tackle tax challenges of the digital economy, establish coherent rules for corporate income taxation, prevent tax treaty abuse, increase transparency by taxpayers, and amend the world’s 3,000 bilateral tax treaties through a multilateral instrument. This past February, the OECD and G20 countries agreed to three key elements that will enable implementation of the BEPS project: a mandate to launch negotiations on a multilateral instrument to streamline implementation of tax treaty-related BEPS measures, an implementation package for country-by-country reporting in 2016, and criteria to assess whether preferential treatment regimes for intellectual property – or the so-called patent boxes – are harmful or not. “Most of this has been derived from public reaction over what’s happening with large corporations and their use of international tax rules,” said Angeline Zioulas, CPA, CA, national transfer pricing leader with MNP LLP in Vancouver. “But it’s good tax planning. Most of these companies are public and need to maximize their shareholder wealth. Coming up with efficient tax planning is a good thing overall, and it’s good for shareholders.”

DruckThe timetable for implementing the bold and large-scale action plan is set for December 2015, an ambitious schedule that many say is impractical and unattainable. “The BEPS initiative is seeking a degree of coordination that has been unprecedented,” noted Claire Kennedy, a tax lawyer who as an officer of the International Bar Association’s (IBA) Taxes Committee is helping the organization draft responses to the BEPS project. “I am not sure that the OECD is going to succeed in everything that they are aiming to achieve because the project is very ambitious and subject to a very short and unrealistic deadline of what amounts to a reworking of the entire international tax framework.”

The combination of tight deadlines and mounting political and public pressure to address gaps and mismatches in tax rules does not lend itself to an informed and thorough analysis nor a careful balancing of policy objectives, adds Kennedy, a partner with Bennett Jones LLP in Toronto.

On top of that, many countries are not waiting for the OECD to rebuild the international tax system. Instead these countries are using the attention and publicity around the BEPS initiative to adopt interim measures to protect their respective tax bases. Many, for instance, are introducing or enacting anti-avoidance rules. In the lead up to the national election in May, the United Kingdom released the diverted profits tax provisions within its draft Finance Bill 2015. The diverted profits tax is a new tax, charged at 25 per cent on profits that are considered to be “artificially diverted” from the UK. Another European country, Austria, promulgated a rule that denies a deduction for interest and royalties paid to related parties in low-tax jurisdictions. Australia, besides enforcing its existing anti-avoidance rules, released stricter debt funding rules and new transfer pricing guidelines for the practice of assigning prices to goods and services sold between controlled or related legal entities within an enterprise.

“The real tension with the BEPS project and with countries is that fiscal policy is a real critical part of any country’s sovereignty, and countries want to be seen as in their own driver’s seat in terms of developing their own fiscal policy,” said Christopher Steeves, leader of the tax group for Fasken Martineau DuMoulin LLP. “By introducing legislation to show that they are being responsive and reactive rather than waiting for the BEPS project to be completed, that will play with voters.”

Canada nearly joined the list of growing countries acting unilaterally. The Finance Department published a consultation paper on treaty shopping, or the practice of structuring a multinational business to take advantage of more favorable tax treaties available in certain jurisdictions, with the aim of introducing its own plan for a domestic treaty override to combat treaty shopping. “Adopting measures that prevent treaty shopping, as some other countries have done, would protect the integrity of Canada’s tax treaties,” said the consultation paper. But last August, the federal government had a change of heart and quietly shelved its domestic initiative to wait for the BEPS proposals under Action 6 on anti-treaty abuse.

EY-BEPS-08-uncertainty-around-BEPS-outcomesAt the same time that countries are tightening tax rules and using aggressive audit tactics such as the Australian Tax Office which is increasingly scrutinizing multinationals through the use of a new special task force or Mexico which is contemplating applying BEPS concepts to previous transactions involving business restructurings, they are also forging ahead and providing tax incentives for multinationals to invest in their jurisdictions, observed Steeves. Patent boxes are a case in point. Designed to attract and nurture research and development companies, patent boxes provide a lower tax rate on profits from work related to patents. “A preferential regime is useful in supporting growth and innovation in a country if it attracts real activity,” said the OECD. “It is not so if it merely encourages companies to shift profits from the location in which the value was actually created to another location where they may be taxed at a lower rate.” Patent boxes have become a sticky point for negotiators involved in the BEPS project. Many countries and organizations like the European Commission view patent boxes as “harmful tax competition,” but the handful of countries that offer it like Britain, Cyprus, and the Netherlands, are resisting pressure from other nations, asserting that it encourages innovation and high-value jobs in research.

“Countries don’t want their tax base eroded but yet they are willing to compete with one another with these various tax plans designed to encourage a company to leave its home jurisdiction and take part of their economy,” said Steeves. “That tension will be a roadblock in some ways for BEPS.”

While governments are supporting various aspects of the BEPS initiative and proceeding on the other hand with preferential tax regimes for certain kinds of income, Kennedy does not believe that those conflicting positions will “per se” sound the death knell of the OECD’s project. “There is a serious question about how BEPS would get implemented in any event,” said Kennedy. “One of the BEPS action items is a multilateral instrument to effect these changes, but I think that is going to be very difficult to pull off given the scope of the changes we are talking about. Almost as a necessity, if there are going to be changes of the nature the OECD is talking about, it’s going to take changes at an individual country legislative level and not one full swoop with this multilateral instrument.”

Business, not surprisingly, are caught in the middle, and are very concerned, said Steeves. When developing cross-border structures, they are asking tax experts such as Steeves to evaluate the proposals and the impact BEPS might have on what they are doing. Given that there is a lot of uncertainty at the moment, Kennedy suggests that business think carefully about their international tax planning. “Business can live with sort of clear rules and regimes,” said Kennedy. “They may be favourable or unfavourable but if they are certain then you can make decisions about investments and business growth.” The uncertainty also makes it challenging for tax advisors, said Zioulas. “It’s a confusing topic,” said Zioulas. “From someone who is living it, and it’s going to affect me and what I do everyday, I absolutely have no idea what’s going to happen. So for us in Canada, it’s wait and see what is going to happen. The best I can do for clients is to say these are things that you need to be aware of when you are conducting your business operations.”

OECD report challenges widely-held assumptions on foreign bribery

The majority of foreign bribes were paid by large companies, usually with the knowledge of senior management, to officials from developed countries to win contracts and cut through red tape, reveals an eye-opening report from a leading think tank that shatters many commonly-held preconceptions about corruption risks.

The report by the Paris-based Organisation for Economic Co-operation and Development, which analyzed 427 foreign bribery cases over the past 15 years, should prompt companies to review and tailor their anti-corruption compliance programs, particularly since nearly a third of the cases occurred in the extractive and construction sector, areas where Canadians are big world players, say compliance experts.

“It’s possible to do business without corruption,” said Milos Barutciski, the co-head of international trade at Bennett Jones LLP in Toronto. “If you have an effective compliance program, which means everything from the tone at the top, down to the procedures, education, training, monitoring and auditing, then you’re less likely to trip over the legal bright lines, and you’re more likely to be able to get the work done without committing an offense.”

The OECD report challenges the notion that bribes are mostly paid to heads of states and government ministers or public officials in poor nations. In almost half of the cases, or 43 per cent, bribes were made to officials in developed or highly developed countries. By far, the largest culprits were officials working for state-owned or controlled enterprises, who were the recipients of over 80 per cent of all bribes. “If you are dealing with state-owned enterprises or foreign officials, you want to understand who you are dealing with, what’s their reputation, and making sure that you are not dealing with the wrong people,” pointed out Stéphane Eljarrat, a partner in the investigations and white collar defence and taxation practices with Davies Ward Phillips & Vineberg LLP in Montreal. Companies also should have proper training programs for employees, third parties or suppliers who interact with state-owned enterprises, especially in countries like China where it can be difficult to identify what companies are state-owned, added Graham Erion, an anti-corruption lawyer with Davis LLP.

Bribery OECDIn the majority of the cases examined by the OECD, bribes were paid to obtain public procurement contracts (57 per cent), but the remaining 43 per cent arose from operational activities such as customs clearance, attempts to gain preferential tax treatment, licensing, and access to confidential information. “That is a reminder that you really have to keep your eye on the ball from a compliance perspective throughout the whole project cycle,” noted Erion.

Not surprisingly, intermediaries were involved in three out of four bribery cases, with go-betweens such as agents, local sales and marketing agents, distributors and brokers implicated in 41 per cent of the cases and corporate vehicles such as subsidiary companies and companies located offshore financial centers in 35 per cent. As points out said Peter Dent, the national leader of Deloitte’s forensic services practice, “that makes perfect sense because you don’t want someone from your organization to be involved. You want the payment to be off your books or be in somebody else’s books.”

Nor was Dent, the Chair and president of Transparency International Canada, surprised by the finding that in 41 per cent of the cases senior management employees paid or authorized the bribe while chief executive officers were involved in 12 per cent of the cases, thereby putting to rest the widely-held view that rogue employees are usually behind bribery schemes. “That is my consistent with my experience as well, especially when you talk about the sums of money that normally have to paid in exchange for these contracts,” said Dent. “There must be some senior management involvement to approve that level of expenditure.” The report found that bribes equalled 10.9 per cent of the transaction value of the deal on average, and 34.5 per cent of the profits, which equalled US$13.8 million per bribe. But given the very complex and concealed nature of corrupt transactions, it is “without doubt” the mere tip of the iceberg, warns the report.

The need for a rigorous anti-corruption compliance program is underlined by the finding that companies became aware of foreign bribery in their international operations through internal auditing in 31 per cent of the cases and mergers and acquisition due diligence procedures in 28 per cent. That’s a figure that will likely increase thanks to the growing number of companies that are becoming less tolerant of foreign bribery, assert anti-corruption experts. “The best scenario is to find out through internal mechanisms before it becomes a live issue with the authorities so you can deal with it, fix the problem, deal with the people involved, and then have the time to determine what is the proper course of action with regards to authorities,” said Eljarrat, who previously worked for the federal Department of Justice in its tax litigation section.

An effective compliance program that incorporates strong whistleblower protection mechanisms to “elicit early bona fide information” that could potentially save the company from the risk of corruption and the costs involved in exposure and sanctioning is key, says the OECD report. Companies are not paying attention though. Whistleblowers notified the corporate hierarchy of foreign bribery in 17 per cent of cases but only one company acted on the information and self-reported the matter to authorities. “Whistleblowing is still a very difficult thing for employees in any institution,” remarked Barutciski. “It’s all very nice to have a whistleblower hotline but the question is how do you respond to the whistleblower. The tendency in most institutions, including governments, is to circle the wagons and view the whistleblower as somehow having something against the company when in fact whistleblowers tend to be particularly loyal to the company and are offended by what they see as abuse of the company’s interest.”

bribery-OECD. EnforcementAnti-bribery enforcement steadily increased after 2005, hit a peak in 2011, with 78 cases concluded that year, dropped considerably in 2012, and leveled off in 2013, reports the OECD, which looked at cases from 41 countries, including seven non-OECD members, that are signatories to the OECD anti-bribery convention. Nearly 70 per cent of the cases were resolved through settlement, often involving a civil or criminal fee. In total, 80 people were found guilty of foreign bribery and fines were imposed on 261 individuals and companies, totalling 1.8 billion euros. Further, the average time taken to conclude foreign bribery cases has steadily increased, from two years in 1999 to 3.9 years in 2007 to 7.3 years in 2013. That’s because companies and individuals are less willing to settle foreign bribery cases, speculates the OECD. In Canada, it takes just as long, if not longer, but for different reasons. “We’re not just very good at it,” said Barutciski. “Law enforcement authorities are still new to the game and relatively speaking unsophisticated in white collar forensic investigations. They are learning quickly and getting decent staff and the government has been devoting more and more resources to those files. The same holds true for prosecution offices.”

There is cautious optimism among anti-corruption experts that Canadian companies are beginning to take foreign bribery more seriously and are viewing it less and less as a necessary evil. “We’re seeing a difference in the large, sophisticated companies,” said Dent. “We are not seeing a difference in the smaller medium-sized, mid-market companies which predominate the Canadian economy. For them it’s all about resources and capacity. But I am encouraged about what’s going on because people are talking about it more and more. What happens in the big corporations tends to trickle down to the smaller ones as well. It could take a generation for us to see real change. We’re still at the beginning.”

The government too needs to up the ante as well, said Eljarrat. The federal government needs to send a clear message that it will no longer tolerate foreign bribery, and when that happens, companies will begin to self-comply, said Eljarrat.

Agreements provide unfair advantage over Canada’s tax treaty partners

In negotiations with a number of countries that have earned a well-deserved reputation for being tax havens, Canada is on the verge of signing its first bilateral tax information exchange agreement (TIEA) with Bermuda, granting the islands a significant tax benefit that would give it an unfair advantage over Canada’s tax treaty partners, according to tax experts.

“The Canadian government has long complained about Canadians using tax havens,” noted Lorne Saltman, a tax lawyer with the law firm Cassels Brock in Toronto. “This seems to encourage it – a rather perverse tax policy.” Continue reading “Agreements provide unfair advantage over Canada’s tax treaty partners”