Canada’s financial system one of the most secretive in the world: Report
Canada’s financial system is less transparent than that of countries often portrayed as corrupt by the mainstream media, such as China, Russia, and Kenya, according to the Tax Justice Network’s 2018 Financial Secrecy Index. The index, released this week, ranks Canada number 21 out of 112 countries studied. In fact, Canada’s financial system is so secretive that it’s less transparent than notorious offshore tax havens such as Bermuda.
That makes Canada one of the key facilitators of illicit financial flaws and financial crimes such as money laundering and tax evasion. The index labels developed countries “the most important providers of international financial secrecy”.
“Financial secrecy is a key facilitator of financial crime, and illicit financial flows including money laundering, corruption and tax evasion,” wrote George Turner, a writer and researcher with the Tax Justice Network, in a blog post. “Jurisdictions who fail to contain it deny citizens elsewhere their human rights and exacerbate global inequality.”
The Tax Justice Network’s Financial Secrecy Index says in its introduction:
An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Secrecy jurisdictions – a term we often use as an alternative to the more widely used term tax havens – use secrecy to attract illicit and illegitimate or abusive financial flows.
The 2018 Financial Secrecy Index is an important addition to the growing body of evidence debunking the notion that Africa and developing countries are key beneficiaries of foreign direct investment, loans, official aid, and charitable donations from the West. According to the index:
Illicit cross-border financial flows have been estimated at $1-1.6 trillion per year: dwarfing the US$135 billion or so in global foreign aid. Since the 1970s African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion. So Africa is a major net creditor to the world – but its assets are in the hands of a wealthy élite, protected by offshore secrecy; while the debts are shouldered by broad African populations.
The report, “Illicit Financial Flows from Developing Countries: 2004-2013” (pdf), released by the Washington, D.C.-based Global Financial Integrity (GFI) in December 2015, found that, between 2004 and 2013, developing countries lost US$7.8 trillion in illicit financial flows. According to the report, Sub-Saharan Africa lost a staggering US$675 billion, the biggest loss of any region when the figures are considered as a percentage of GDP. The report’s estimate is “highly conservative” as it excludes the “movements of bulk cash, the mispricing of services, or many types of money laundering”.
Where does the money Africa loses through illicit financial flows go? According to GFI:
Every dollar that leaves one country must end up in another. Very often, this means that illicit financial outflows from developing countries ultimately end up in banks in developed countries like the United States and United Kingdom, as well as in tax havens like Switzerland, the British Virgin Islands, or Singapore. GFI research suggests that about 45% of illicit flows end up in offshore financial centers, and 55% in developed countries.
The Tax Justice Network’s Financial Secrecy Index “reveals that traditional stereotypes of tax havens are misconceived. The world’s most important providers of financial secrecy harbouring looted assets are mostly not small, palm-fringed islands as many suppose, but some of the world’s biggest and wealthiest countries. Rich OECD member countries and their satellites are the main recipients of or conduits for these illicit flows.”
In a piece entitled, “Canadian Companies Exploit African Resources,” published by CounterPunch in June 2016, Canadian journalist and author, Yves Engler, wrote: “With a mere 0.5 percent of the world’s population, Canada is home to half of all internationally listed mining companies operating in Africa”.
Natural Resources Canada recently confirmed through its “Information Bulletin, December 2016” document, published January 2017, that Canada’s mining assets in Africa were worth $31.3 billion in 2015.
But Canada isn’t just one of the key beneficiaries of the billions of dollars being stolen from Africa and developing countries every year by foreign corporations through heavy resource extraction and illicit financial outflows. Recent Toronto Star/CBC-Radio Canada investigative reporting on the on the Panama Papers, a leak of 11.5 million documents obtained by the U.S.-based International Consortium of Investigative Journalists and the Germany newspaper Suddeutsche Zeitung, placed Canada and notorious tax havens in the same room. The Toronto Star‘s reporting on the series launched with an eye-opening report, entitled, “Snow washing: Canada is the world’s newest tax haven“.
The Toronto Star/CBC-Radio Canada report stated that Mossack Fonseca, the Panama-based accounting firm at the centre of the Panama Papers, and a dozen countries, “actively marketed Canada as a tax haven“. According to the Star:
Canada is quietly emerging as a popular tax haven for the global elite, who create shell companies with figurehead directors to evade or avoid taxes.
As a heavy duty natural resource extractor, tax haven, and facilitator of global financial secrecy, Canada is robbing the economies of Africa and developing countries from numerous fronts.
Obert Madondo is an Ottawa-based blogger, activist, photographer, digital rights enthusiast, former political aide, and former international development administrator. He’s the founder and editor of these blogs: The Canadian Progressive, Zimbabwean Progressive, and Charity Files. Follow him on Twitter: @Obiemad