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Public database not useful for corporate transparency: Rotfleisch

Although several ‘tax haven’ countries are moving forward with public databases for corporate ownership, a similar structure would likely prove to be ineffective in Canada, given the differences in transparency that already exist between the jurisdictions, Canadian tax lawyer David J. Rotfleisch tells

As the Toronto Star recently reported, Britain’s House of Commons has passed legislation requiring company owners registered in Bermuda, the Cayman Islands and the British Virgin Islands to reveal themselves via public databases.

As the article notes, more than half of the offshore companies named in the Panama Papers were based in the British Virgin Islands, while 70 per cent of the offshore corporations named in the Paradise Papers were incorporated in either Bermuda or the Cayman Islands.

The requirement, says the Star, would result in “more open corporate records” for those jurisdictions as compared to Canada, where, it says, there is no requirement for company owners — known as “beneficial” owners — to list their names in provincial or federal registries.

However, Rotfleisch, founding tax lawyer with Rotfleisch & Samulovitch Professional Corporation, says bringing Canada into the tax haven issue is an “overreach,” as the Canada Revenue Agency (CRA) already knows who owns each corporation.

“While share ownership is not a matter of public record, it is a part of every corporate tax return. You have to indicate the owners of a corporation when you file your return. So the CRA is fully aware of who owns each corporation. All that a public registry would do would be to make the information available to the public and the question we have to ask is why is it important that my neighbour know who owns my corporation?" Rotfleisch says.

“Is that something we want people to know? That really is a public policy and privacy rights question. So the CRA has the ability to data mine the ownership of corporations if they need to because they have all of the data that they need.

“That’s the big difference between Canada and tax haven jurisdictions where there are no tax returns and there’s no knowledge of, or no revealing of, who the share owners are,” he says.

At the same time, Rotfleisch also says he is not convinced public databases will prove to be more useful in other jurisdictions or provide much more transparency, given that it is possible for individuals to obscure ownership via a nominee or through layers of corporations owning shares.

“Anybody who wants to hide share ownership has the ability to do it through any number of means and a public database doesn’t really solve that problem,” he says.

“I’m not that impressed with the statute and I don’t really think that Canada needs to emulate it. I really question the utility of it.”

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