A massive leak of tax haven documents shows that a prominent Winnipeg family routinely transferred millions of dollars between its Canadian and foreign holdings, sometimes to buy shares that were otherwise not available to Canadians.
Earlier this year, the International Consortium of Investigative Journalists (ICIJ) released millions of documents leaked by a tax haven insider.
- Massive data leak exposes offshore financial secrets
- Secret files reveal more Canadians using offshore tax havens
- INTERACTIVE: How the rich hide their money
- How Canada's banks help money move in and out of tax havens
More than 500 Canadians were named in the leak, including Graham Lount, a longtime real-estate developer in Winnipeg.
Lount, 92, started the Graham C. Lount Family Foundation, a registered charity that donates hundreds of thousands of dollars each year to organizations like Assiniboine Park and the Boys and Girls Club.
According to emails, account listings and other leaked documents, his company, Lount Corp., once owned an offshore entity called Mebsuta Inc.
The documents, which have been seen by CBC News, outline millions of dollars in transfers back and forth between Lount's North American companies and Mebsuta, based in the British Virgin Islands.
The transfers took the form of loans between corporations — a practice that experts say is common for companies trying to reduce their tax burden.
"Generally when companies loan to each other, they're usually doing that at below market rates of interest, and it's a way to transfer profits. It's called 'profit shifting,'" said Dennis Howlett, the executive director of Canadians for Tax Fairness.
A $1.9-million US transfer from Lount Corp. to Mebsuta, outlined in the documents, was described as a "non-interest bearing on-call loan."
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CBC News spoke to several tax lawyers, the Canada Revenue Agency and the office of the federal finance minister about loans between corporations. None could definitively say if a loan between a Canadian corporation and one in the British Virgin Islands would be taxable, but most agreed loans between corporations are a grey area in the tax code.
The documents indicate the money lent by Lount Corp. to Mebsuta was to be used to invest in offshore funds — some of which, according to the fund's founding documents, were not available to Canadians.
At least one expert CBC News spoke with said Canadians were barred from investing in those funds because the fund was not willing to go through the processes necessary in order to accept Canadian investors.
Laws followed and taxes paid, says current CEO
Colin Lount, who is Graham Lount's son and the current chief executive officer of Lount Corp., told CBC News that his company, at one time, owned offshore companies and funds, but not anymore.
Lount, a trained architect, said his father "was always very involved with tax planning" and was most interested in leaving something behind for his five children.
Colin Lount said Mebsuta was created at a time when hedge funds were flourishing "but occasionally one wouldn't be available to Canadians, and that meant anyone who wanted to get in … would have to set up an offshore entity."
Lount said his father thought he paid too much tax and "didn't really think, going way back, that the government really spent tax money properly."
Because of this, according to his son, Graham Lount started the Lount Family Foundation.
According to Lount, his father would offset his taxes owed through donations to his charity, which would then use the money to support local causes.
He added that his family and their companies "have never been offside with taxes. If there was taxes due, certainly they were paid."
While perfectly legal, this kind of donating worries Howlett.
"The question has to be raised: are wealthy families the best ones to choose what's in most need of financial support?" he said.
Are the wealthy paying their fair share?
As a result of what he calls "aggressive tax planning," Howlett said "the richest 10 per cent in Canada actually pay the lowest percentage of their income in taxes."
Howlett said his organization estimates that Canada and the provinces miss out on between $7 billion and $20 billion a year due to tax havens and "aggressive tax planning."
"For the very wealthy, there are all kinds of tax loopholes," he said, adding that such loopholes include doing business in tax havens.
Howlett called the tax-avoidance options that are available to wealthy individuals "unfair" and said the net result is "governments with huge deficits [and] cutbacks to health, education and social programs."
"It [also] means middle-income Canadians are the ones who have to assume a bigger burden in supporting government, and that's not fair," he added.
CBC News asked to speak to Graham Lount. A letter from a lawyer representing the Lount Family Foundation and the Lount family stated that Colin Lount answered the CBC's questions in "good faith," and that, "in our view, the CBC has unlawfully violated the privacy of our clients."