December 7, 2020 

In times of great need, it’s good to know that the government is there to pick up some of your slack. I mean, not necessarily you, dear reader. Your rent assistance will go directly to your landlord, or maybe your cash benefits will be clawed back because of their ever-changing and confusing requirements. 
 

But, if you’re a shareholder in a Canadian company, don’t you worry at all. The government assistance handed out will make sure those stock dividends keep getting paid out.
 

A Financial Post investigation of market data found that at least 68 companies continued paying out stock dividends at the same time as they were taking in Canada Emergency Wage Subsidy (CEWS) funds from the federal government, to the tune of at least a combined $1 billion. 
 

The figures likely don’t account for all the companies that have received the CEWS, as a list of who has gotten what hasn’t been released by the government. Instead, the Post went through the financial documents of publicly traded companies to figure out who was receiving assistance.
 

The corporations getting government money and still paying out their shareholders is a fun one. It includes: Imperial Oil Ltd.; for-profit long-term care home operator Extendicare Inc.; Leon’s Furniture Ltd.; RioCan REIT; Chartwell Retirement Residences.
 

It’s just another one of those indignities of the pandemic, where the higher up the chain you are, the more freely the benefits are dished out, with minimal transparency or scrutiny. If you’re an individual claiming benefits? Heh, good luck pal.
 

Most of the companies said that the money they received did not go directly toward paying for dividends — never mind the stock buybacks and so on that many of them took part in — but rather that said money came from somewhere else within the company.
 

Which, uh, okay. I mean, you can say the money going in one door and out another is not connected, but here in the real world it doesn’t actually make a difference. You’re saying your company is in desperate shape and needs the government to help cover wages to offset lost revenue, and as thanks you make sure your shareholders keep getting paid out cash on their investment.

It’s infuriating, but typical.
 

Here’s a fun quote to the FP from someone who runs a fund that only invests in stocks paying dividends which sums things up nicely:
 

“I’m one of those investors who wants to see companies go through a hard time and make hard choices and keep a dividend at the top of their priorities. […] I would rather see companies cutting salaries and cutting costs.” — Newhaven Asset Management Inc. president Ryan Bushell.
 

What more is there to say, really? We’re all in this together, getting our shins repeatedly kicked by the people with power. It’s great!

Dig Deeper: [See below]

April 28, 2020

Corporate Tax Cheats Don’t Deserve COVID-19 Bailouts

https://readpassage.com/corporate-tax-cheats-dont-deserve-covid-19-bailouts/

Bruce Crown

These companies are stealing your money. Why should we reward them with bailouts?

Last week [note date of article], Prime Minister Justin Trudeau was asked on several occasions whether he will exclude companies incorporated in tax havens from bailout funds. He said no each time, claiming doing so would punish workers, and that this isn’t the appropriate time to crack down on tax cheats. We would be derelict in our duties as citizens if we didn’t ask: If not now, while average Canadians and employers are struggling due to a global economic shutdown, then when?

These calls to plug tax loopholes came after three European states adopted rational tax measures to exclude tax cheats from their aid packages, which are currently awaiting approval by the European Commission to be enforceable. 

On April 18, Danish parliament agreed to implement some auxiliary requirements to its generous aid package for employers and companies. Among them was a provision every party agreed to: companies based in tax havens cannot receive compensation. Another enforcement mechanism put in place by parliament is the government’s ability to request a sworn statement from companies receiving a bailout, attesting that they pay the taxes for which they are liable in accordance with both international and national regulations. Lastly, the government will be auditing companies at random post-bailout to ensure they abide by these rules.

Poland has adopted a similar strategy, requiring companies who want access to the €5.5 billion bailout fund to pay domestic business taxes. France has since followed suit.

These measures have numerous benefits. While we’ve become numb to the shock of large corporations receiving our tax dollars, siphoning it to tax havens, issuing buybacks and giving their executives multi-million dollar bonuses, Denmark’s new rules will help curb this behaviour. Additionally, companies can’t cut and run, as seen both in the disastrous 2009 GM bailout in Canada and the 2017 FoxConn bailout in Wisconsin. Most importantly, money will flow into the local economy instead of being siphoned off. 

Trudeau has talked about closing tax loopholes in the past. In 2015, he campaigned on battling tax avoidance and called for a global effort in punishing persons and corporations who utilize tax havens. In May 2016, responding to the Panama Papers, Trudeau’s Liberals committed to running down wealthy tax-cheats. Now, despite the fact that tax avoidance cost Canada up to $25 billion in 2016 alone, Trudeau refuses to make good on his promise, even though measures like those in Denmark, France and Poland would be useful. 

More than 1,200 entities listed in the Panama and Paradise papers were linked to Canada, most of which have yet to be investigated. Meanwhile, Tim Hortons sells us Canadianness, yet they’re a subsidiary of a holding company that avoids taxes, and operates under a Brazilian-American investment firm incorporated in the Cayman Islands. The Canadian Revenue Agency (CRA) has also been rather lax with companies utilizing tax havens. In early 2018, for example, the CRA wrote off $133 million owed from a single taxpayer. 

Canada also has an unfortunate history of corporations avoiding taxes while hankering for free handouts from taxpayers. In 2018, the CRA found that Sequoia Resources Corp., a company with holdings in Alberta’s oil patch, served as a vehicle for tax evasion in connection with offshore accounts. The company eventually filed for bankruptcy, and abandoned hundreds of millions of dollars in environmental fees as well as other claims. 

It wouldn’t be very difficult for Canada to implement measures similar to those in Poland, France and Denmark. CRA investigators, in accordance with municipal officers and the RCMP, already have the power to investigate tax avoidance and fraud. They could expand this power to monitor our tax dollars when they’re remitted to corporations with certain conditions. An implementation of a bailout watchdog would go a long way in passing policy that benefits not just the economy, but also the average Canadian.

Moreover, if the Canadian government established criteria in accordance with international tax standards and then screened companies against them, we’d be able to ensure taxpayer funds remitted to large corporations aren’t simply funnelled to executives or taken out of the country’s economic flow and into a tax haven. 

The Canadian government could also list and delist countries and corporations that make internal tax-avoidance commitments. If, for example, a company receives a taxpayer-funded bailout and suddenly decides not to be true to their commitments — i.e. through relocation, not opening a plant, laying off employees, etc. — they could be delisted by Corporations Canada and banned from operation. 

Another simple requirement: companies that don’t pay taxes in Canada can’t access any form of government assistance under any circumstance. 

These companies laugh all the way to the bank with our money. Their thefts are regularly touted with pride at opulent executive retreats, and hidden from public records in opaque and complex corporate documents. Why are we continuing to reward them?

We don’t owe tax-avoiding companies anything, especially our tax dollars. Our government’s decision not to exclude corporations that utilize tax havens from bailouts is bewildering and morally dubious. It must change.

Bruce Crown is an author from Toronto. He holds an HBA from the University of Toronto, and an M.Phil. from the University of Copenhagen. He splits his time between Copenhagen and Toronto. He is on Twitter @BruceCrown.

[Top photo: Photo from Twitter (@justintrudeau)]