Canada and Panama: Could it sink Justin Trudeau?

Politicians worldwide are jockeying for position as the world’s attention turns to the Panama Papers, a massive leak of data related to Panama and other jurisdictions’ tax-dodging practices. Canada is no exception.

Allies of Prime Minister Justin Trudeau have reportedly been studying the massive leak to investigate whether it contains information about offshore accounts held by his ministers, cabinet ministers, staffers and senior government officials.

Here is what’s known so far, what’s not known, and why not.

What are the Panama Papers?

Once considered a global curiosity, the Panama Papers – named for the Panamanian law firm Mossack Fonseca, the law firm that leaked the data – have been the subject of a global investigation by The International Consortium of Investigative Journalists (ICIJ), with support from hundreds of journalists across 60 countries.

Two-hundred million documents about the offshore holdings of more than 500 high-net-worth individuals and companies were leaked from Mossack Fonseca, the AP reported.

The leaked data focuses on transfers to and from 11.5 million bank accounts across 182 countries. Among the information released: e-mails, bank documents, ledgers, tax documents and property records. The documents came from Mossack Fonseca, which has offices in locations as diverse as Russia, Kenya, Uruguay and the United States.

Why are leaders in the spotlight?

Corruption is the foremost issue on many leaders’ minds, as they face tight U.S. scrutiny and a potential scandal back home over alleged pay-to-play in Africa and the Caribbean. French President Francois Hollande has launched an investigation into the alleged use of offshore companies by three former French presidents.

But like the United States, Canada has been largely left out of the first wave of revelations. The focus remains squarely on other countries that have posted eye-popping figures for income and tax evasion: Switzerland (lots of Swiss bank accounts), Luxembourg (unreported properties), Bahamas (individuals parked their income overseas and income held via offshore corporations or trusts), the Cayman Islands (large business and high net-worth residents) and the UK.

While some countries’ leaders are having second thoughts about their offshore investments – Nicolas Sarkozy, David Cameron and former Italian Prime Minister Silvio Berlusconi have all reported more than €2 million in Swiss accounts – Canadian leaders have not been named.

What does Canada have to hide?

There have been suggestions Canada has used offshore financial structures to minimize its tax obligations and avoid having its funds used for legitimate purposes, such as police and military spending. While these allegations have not been proven, Canada is under pressure from other countries to continue reforms to offshore tax haven tax evasion strategies. The government recently passed an additional $550-million in incentives for multinational companies, and has expanded an inquiry into asset stripping, where wealthy individuals use debt that has been sold to borrowers at high interest rates to seize control of a property or business.

Why hasn’t Canada laid a charge?

Under the OECD’s country by country reports on tax cooperation, Canada is generally considered in compliance. But that doesn’t mean Canada is a good listener. A number of international banks and other organizations have moved against Canadian banks, including names like HSBC, which terminated its relationship with Royal Bank of Canada and advised clients to withdraw their money from Canadian banks. So while the Panama Papers have no clear connection to Canada, for now it seems Canadian officials are steering clear of any involvement.

Follow Ivan Semeniuk on Twitter @SemeniukIvan

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