NDP and Liberals blast government over offshore pension revelations

Public servants' retirement money should not be stashed in tax havens, opposition MPs said Thursday in the wake of CBC News revelations about the federal civil service's pension funds.

"It is deeply troubling," said Murray Rankin, the NDP's critic on tax issues.

"Here we are talking at the OECD really tough about how we're going after multinationals for tax avoidance…. Even if the government didn't know, it is consistent with a pattern where we appear to be backing off."

• Crown corporation used shell companies to skirt taxes
• Government distances itself from offshore tax 'scheme'
• Leaked files expose companies' secret tax deals

The reproach follows a series of CBC reports on investments by the Public Sector Pension Investment Board, the federal Crown corporation that manages $94 billion in retirement funds for federal civil servants, RCMP members and Canadian Forces personnel.

Based on leaked records obtained by the Washington-based International Consortium of Investigative Journalists, the reports found that at least $700 million in public servants' pension money has been shuffled through a maze of corporations in the offshore haven of Luxembourg.

• INTERACTIVE | Explore the leaked documents

The New Democrats attacked the government over the revelations during question period Thursday.

"An international investigation has revealed that a Canadian Crown corporation used a phoney Luxembourg shell company to avoid paying foreign taxes," NDP Deputy Leader Megan Leslie said. "So how are Canadians supposed to trust the Conservatives to crack down on aggressive tax avoidance when they’re busy setting up shell companies of their own?"

Treasury Board President Tony Clement, who oversees the pension body and appoints its members, replied that it is an "arm’s-length administration from the federal government" with its own board of directors.

"We of course on this side of the House expect that all investments should be done in compliance with laws and rules and regulations in a transparent manner, and to the greater benefit of the clients," Clement said.

Tax avoidance puts pensions 'at risk'

Just last week, a global labour organization called on pension funds worldwide to look into whether  they engage in "inappropriate" tax strategies such as "use of secrecy jurisdictions or tax havens,"  and, where feasible, to "change tax practices."

"Tax payments fund essential services that allow communities, businesses and investments to thrive," said the International Trade Union Confederation statement, which was backed by the Canadian Labour Congress.

"Attempts to increase short-term returns through aggressive tax planning undermine the broader economy and investment environment, placing long-term benefits at risk and jeopardizing workers' incomes and retirement security."

National governments, including Canada's, have pledged over the last couple of years to fight the complicated financial manoeuvres that see multinational corporations routing their profits through shell companies in tax-friendly jurisdictions.

Companies like Google, Amazon and Apple use legal loopholes to shift money, often into Caribbean havens, via subsidiaries in places like Luxembourg, Ireland and the Netherlands. In the face of this so-called tax leakage, the G8 and G20 groups of countries and the Organization for Economic Co-operation and Development have vowed to crack down.

"The late Jim Flaherty had promised in Budget 2013 to go after large corporations who cheat the Canadian system and Canadian taxpayers with aggressive offshore tax avoidance. Since then, Finance Minister Joe Oliver has consulted with big businesses and shelved the project," Liberal MP and revenue critic Emmanuel Dubourg said in a statement Thursday.

"This report of aggressive offshore tax avoidance by a Canadian state agency explains why the Conservatives are in no position to take a leadership role to combat this scourge. They prefer to side with big businesses and billionaires who find a way to pay no taxes, anywhere."

Pension board says transactions 'much easier'

The Public Sector Pension Investment Board, also known as PSP Investments, has defended its use of Luxembourg companies, saying it "fully complies with all laws, rules and regulations" and "is in the best interests of the pension plans for which we manage assets."

In email exchanges in recent weeks, Mark Boutet, the pension board's vice-president, said the operating philosophy is that when the time comes to sell assets, it is "much easier" to divest any European investments if they're held in a European subsidiary rather than a Canadian one.

"Luxembourg allows us to establish such a European corporation without increasing the tax burden that would have been otherwise available to us in Canada," he said.

• READ | Crown corporation's secret tax plan

But a former RCMP corporal who probed commercial crime for 16 years for the Mounties said he's concerned his pension money is being shifted to one of the very jurisdictions that used to stonewall some of his money-tracing investigations.

"Perhaps the interest that they are gaining as a result of these investments is far greater than what they can possibly gain elsewhere. Maybe that’s true," said Jeff Filliter, who now runs his own firm investigating fraud and money laundering.  

"But I would be concerned… because of the confidentiality issues, and because of potential for tax avoidance. I would question why would they choose to do that with our funds."