Who gets the tax breaks?

Photo: Flickr

Former finance minister Colin Hansen, CEO of AdvantageBC.

By Dermod Travis

They're the stories that tug at us. Here's one from Waco, Texas:

“My 86 year old mom...is losing her money to these people who promise her in order to accept her "sweepstakes" she has to keep sending them money for processing fees. She suffers from dementia and this company is taking advantage of her. Someone needs to find this company and make them stop abusing and taking money from the elderly.”

Someone did – the U.S. Treasury Department. They found the company, PacNet Services, on Howe St. in downtown Vancouver. 

According to the department, it had “a nearly 20-year history of knowingly processing payments related to fraudulent solicitation schemes.” U.S. officials shut it down last year.

In a plot twist, it turns out the B.C. government was giving PacNet a 100 per cent corporate tax break on its international financial transactions, through the little-known International Business Activity program at AdvantageBC.

AdvantageBC and its Quebec counterpart, Finance Montréal, trace their origins back to 1986, when the federal government established the International Banking Centre designation “to encourage the repatriation of non-resident loans booked in low-tax jurisdictions.”

But, over the last decade, the government extended the AdvantageBC program into new industries, including the pharmaceutical industry, film distribution, wastewater treatment and fuel cell technology. The incentives kept getting sweeter and sweeter as well.

Along with the program's morphing, came a rapidly escalating cost. In the nine years from 1999 to 2007, the province forewent $26 million in potential tax revenue through the program. In the nine years since, $176.3 million. 

Today, 66 members are listed on AdvantageBC's website. There may be more, as there's no obligation on the part of AdvantageBC to identify its members. Three are part of HSBC Bank.

Four of Canada's five big banks are members.

Not including PacNet and its two associated companies, four other members were among the Top 25 banks implicated in what became known as the Global Laundromat, a four-year scheme to launder $US20.8 billion in organized crime proceeds from Russia. 

Unlike Finance Montréal, not a single member of the AdvantageBC board of directors represents the B.C. government.

The organization takes a 0.45 per cent cut of the “income earned by the international business in the preceding year” to help finance its operations. In 2016, the cut accounted for $1,027,582 of the organization's funding. Membership fees brought in $78,845. CEO Colin Hansen is paid $189,000.

Some of the companies in the roster of members make one wonder what the extent of the government's due diligence was before the tax breaks were extended.

– Dermod Travis is the executive director of IntegrityBC.