Offshore Pensions in Millions

Offshore tax havens conjure up a wonderland for the well-heeled and their wealth.

But investigations based on the Paradise Papers leak has found that millions of ordinary Canadians also have an interest in money parked in tax havens — almost certainly without knowing it.

Seven of the country’s so-called Big 8 pension funds, representing more than 25 million workers, have used tax havens as they invest Canadians’ retirement savings, according to records in the huge leak of offshore financial documents made public last month.

It is true that pension funds need to make enough money to ensure they can pay benefits to an aging population, and using tax havens for investments abroad can help the bottom line. But it raises questions about whether Canadians’ retirement money is underwriting an offshore industry that contradicts tax fairness and transparency.

The pensions’ high-profile offshore dealings include the 407 Highway north of Toronto, in which the Canada Pension Plan Investment Board bought a 40% stake in — partly through an entity in Bermuda. Or the high-speed rail line from London, England, to the Channel Tunnel, which a pair of Canadian pension funds owned until earlier this year via a shell company in Jersey, a tax haven in the Channel Islands.

None of the pension plans would say exactly how much of their revenue is generated by investments through tax havens. When questioned, almost all of them pointed out that Canada doesn’t tax pension plans on their investment income, so their use of tax havens makes no difference to federal or provincial government coffers.

But other countries have different tax rules, and some Canadian pension funds acknowledged that offshore investment structures help them legally minimize their tax burdens abroad. Some even said it’s their duty to do so in order to maximize savings available for retirees.

A former top pension executive said that while Canada’s major retirement funds used to invest nearly all of their assets domestically, it would be impossible to do so today and still generate the profits needed to pay decent benefits.

That doesn’t wash with Hassan Yussuff, the president of the Canadian Labour Congress and one of Canada’s most prominent voices for workers. Yussuff said Canadians’ pensions simply shouldn’t be invested in tax havens because of their tendency toward tax dodging.

Ottawa has repeatedly declared that it wants to make the tax system more fair — in part, the Finance Department says on its website, by efforts “to stop the use of tax havens.”