https://www.thestar.com/news/world/2016/12/07/report-corporate-secrecy-makes-canada-a-haven-for-white-collar-crime.html\
Transparency International (whose website describes them as a global civil society organization leading the fight against corruption..) is calling for a public registry of the real owners behind corporations. According to them, it’s easier to incorporate a company in Canada than it is to get a library card (which I can attest to having recently tried to get a VPL card…). Canada is apparently becoming a “safe haven” for white collar crime due to in large part the fact that no corporate registry in Canada requires the disclosure of the beneficial owner behind the corporation. What’s with all the secrecy? If you have nothing to hide… why hide?
I guess you could call this “lifting up the veil and peaking behind it”, without ever really piercing it. Just checking in on who the actors are behind the scene… We should have legislation which regulates and enforces this more. I don’t think this type of legislation would be a disincentive for businesses to come to Canada because Transparency International makes a good point – legal entities and arrangements can be transparent while still preserving what they’re intended to do – limit liability, grant legitimate tax benefits and enable people to manage assets on another person’s behalf. I only see it dis-incentivizing people and companies that want to come here and do something sketchy…
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I found it interesting that the article pointed to the housing crisis in Vancouver, and the use of shell companies to purchase homes – requiring only share transfers, rather than property transfers to change ownership. I feel like a solution is going to have to come from several fronts as this is a problem that permeates not just the stock market, but also the housing market. I wonder how much the interest in investing in Vancouver real estate has been curbed by the new taxes on empty homes, and what new ways to get around them have been invented already.
I’m thinking about this article from a perspective of incentives, in the wake of the idea of wanting to preserve Canada’s “international competitiveness” and not discourage companies who can contribute to the growth metrics of the Canadian economy from doing business here. I think this article provides a productive solution to the problems they’re addressing (eg. preserving the rule of law, being able to hold people to account, and encouraging responsible business decisions) without significantly hurting Canada’s competitiveness. If what such a registry would be doing would be allowing us to see who the actors are without legally affecting their liability in any way, it would allow Canada to cut out large swaths of non-taxable income gained largely from criminal activity in some cases, and in other cases allow money that should be taxable from escaping the country seemingly unaccounted for, through shell companies and the like. In this way, it could contribute to a (maybe not incredibly significant, but still positive) boost in economic growth. If companies who want to engage in these types of activities are discouraged from operating in Canada, the income they would have provided would hopefully be significantly offset by the income saved from helping limit white collar crime. What I’m saying is, I believe it would potentially be a net positive move for Canada to include such a registry, and honestly see no reason not to do it.
Wow. I found this article really eye opening. I knew that there were a lot of foreign investors in the Vancouver housing market but did not realize that they were buying these homes through shell companies. I also didn’t realize that the individuals behind these companies were purchasing these houses with “illegitimate funds”.
I also think that companies who are obtaining illegitimate funds should not be able to operate in Canada. I was surprised to learn that none of the disclosure rules in Canada currently require the of the REAL owner behind the corporation. I do not see any benefit to continue allowing this to happen. I think that a registry would be a step towards preventing this type of corporate behaviour and is a step towards holding individuals responsible for fraudulent or criminal behaviour.
I think it is in Canadian society’s best interest to stop allowing individuals to hide behind corporate shields in this way. As the article states, “legal entities and arrangements can be transparent while still preserving what they’re intended to do, which is to limit liability, grant legitimate tax benefits and enable people to manage assets on another’s behalf.”