Study finds Canadian companies transferred $120 billion to tax haven Luxembourg
According to a research institute in Quebec, some Canadian companies have utilized Luxembourg as a “tax haven” in the last decade, enabling them to avoid paying domestic taxes on billions of dollars in profits.
Colin Pratte, a co-author of the study and IRIS researcher, stated that Luxembourg was chosen for the research project due to its public availability of financial information, unlike other tax havens. However, he noted that the study may not capture the entire tax avoidance picture and that they may not have received a complete list of Canadian companies operating there.
The study found that companies utilizing Luxembourg as a tax haven transfer money through a process known as intra-group debt, which allows money to be loaned between subsidiaries in different countries. This practice increases a company’s debt and interest costs while lowering its taxable income in its home country. Although this tactic is not illegal, the researchers argued that it goes against the “spirit” of the law.
The companies listed in the study operate in various sectors, including finance and insurance, technology, natural resources, and food. The finance and insurance sectors alone represented nearly one-third of Canadian assets registered in Luxembourg, while the technology sector represented a quarter of total assets.
