An ordinary Canadian?s holiday in Barbados is seldom connected to the island?s status as a comfortable place to pay taxes. But for a number of shell companies of Canadian Steamship Lines (CSL), the shipping conglomerate owned by Prime Minister Paul Martin, until last year when he gave it to his sons, it?s a warm place to be indeed.
While the CSL Canadian company?s domestic subsidiaries have been receiving federal government handouts–$161 million during Martin?s time as finance minister, the Barbados CSL offshore shells have also been receiving major largess in the form of tax sheltering.
Barbados is one of a few international tax havens that allows Canadian-owned companies to avoid paying the full tax load in Canada, and in particular allows CSL to receive specific tax benefits.
How this situation occurred reveals significant participation by none other than Canada?s former Finance Minister, former CSL owner and now our present Prime Minister.
In 1992, one year before he was appointed Finance Minister and entered the cabinet, Paul Martin?s CSL set up five offshore companies in Liberia, a tax haven of choice for international/offshore shipping businesses.
In his 1994 budget speech, Finance Minister Martin said: ?Certain Canadian corporations are not paying an appropriate level of taxes. Accordingly we are taking measures to prevent companies from using foreign affiliates to avoid paying Canadian taxes which are otherwise due.?
Martin said such tax havens needed to be eliminated to ensure international equity.
In 2003, as Paul Martin began his quest to be Prime Minister, CSL owned in whole and in part, eighteen foreign flagged ships sailing around the world from Montreal to Melbourne.
On February 5 of this year, Martin said that as Finance Minister he was the one who brought the matter of tax havens to the G-7 and the OECD and that under Canada?s leadership the G-7 undertook a monumental study to shut down these havens.
In fact, at their 1997 meeting, the G-7 Heads of State and OECD Ministers issued the recommendation: ?that countries consider terminating their tax conventions with tax havens and consider not entering into tax treaties with such countries in the future.?
So where you may ask, does Barbados fit into all of this?
Well, the G-7, the OECD and Finance Minister Martin didn?t shut down all the tax havens. After places like Liberia were declared off-limits, by remarkable coincidence, Barbados was left open and that?s exactly where the CSL offshore companies went next.
Barbados is an offshore tax haven with which Canada has a sweet deal. How much does an offshore company registered in the island have to pay? A whopping 2.5 percent annually.
It also helps that the owner of the companies located there can then bring the remaining profits back into Canada with no additional taxes applied. Now that?s some holiday!