In a Fifth Estate news report, the Canadian Broadcasting Corporation (CBC) has revived the story of how wealthy KPMG clients may be dodging taxes through secret offshore havens. This was done by highlighting the case of the Coopers. After having amassed a fortune from selling scrap metal in South Africa, the family relocated to Victoria in Canada in the mid-1990s.
In 2001, they signed on for a KPMG tax scheme that would have them place their $25 million fortune in offshore accounts. It involved setting up shell companies in the Isle of Man. The clients involved would purportedly give away their wealth to the shell companies and receive tax-free gifts from income earned through overseas investments. As a result, the Coopers would end up paying hardly anything in income tax for over a decade. CRA auditors that discovered this scheme called it a sham that involved deception. At least 25 clients were identified as being part of the scheme.
The report appears to have spurred the current finance committee into action. MPs in the House of Commons finance committee announced in May plans to re-open dormant investigations into the Isle of Man tax shelters.
While testifying before the finance committee earlier in the month, KPMG Canada’s head of tax, Lucy lacovelli, found herself in the crosshairs of MPs who wanted details of the offshore tax scheme. She however declined to give out any names, drawing sharp criticism from the MPs. The accounting firm has been given up to June to comply with this request.
Bloc MP, Gabriel Ste-Marie, has warned that the firm cannot refuse to provide this information. MPs are empowered to subpoena documents and witnesses on this. However, the firm did previously appeal a judge’s order to submit these names back in 2013. They argued they had a duty of client confidentiality to clients under the code of professional conduct of the Chartered Accountants Association of Ontario. It took till 2016 for KPMG and the CRA to come to a confidential agreement that would see wealthy clients pay back taxes without penalties. Details of the agreement were not publicly revealed. KPMG says it complied with this ruling.
According to the Fifth Estate report, leaked emails indicate that KPMG may have helped set up four shell companies for wealthy clients, a claim that lacovelli and KPMG have denied. A KPMG spokesperson confirmed that CBC/Radio Canada has been sent a notice of libel in regard to this report.