When someone sets up an offshore entity, they often give a brief description, which is set on a financial document. But a newly unsealed Canadian court document suggests an offshore scheme that started in the mid-1990s exploited extremely basic accounting procedures.
The Atlantic News says Marjan Kaliratov, a Dubai-based entrepreneur, helped set up 900 offshore entities in Europe to shield assets from any scrutiny.
The paper identified 43 of these corporations as questionable, including 18 in British Virgin Islands and 51 in Malta. The company that allegedly worked with Kaliratov, announced in court filings, was, in reality, a shell company used to hide money that went to a Bono-linked charity, Bread for the World.
Norman Barme, an Ottawa tax lawyer, said a Canadian tax avoidance scheme such as this would go far beyond what is normally known.
He said this should alert the CRA, the federal tax agency, to look into hundreds of offshore entities. Barme previously told Canada’s CBC that the type of scheme highlighted in the Atlantic News story is so complicated, it only leaves the CRA’s blind eye untouched.
“What you are doing there is basically transferring assets offshore for tax avoidance purposes,” Barme said. “Where you are doing that is behind a shell company.”
In the case of Kaliratov’s offshore scheme, it appears that Kaliratov was the company set up with the biggest fish from Ireland. Kevin Grace, a former employee at Kaliratov’s company, apparently got in touch with the Bono charity to suggest buying a shipping company on the cheap in order to shake off taxes. The company gave them a shell to use and was a hit with Grace, even though Kaliratov allegedly ignored his advice to move money into a tax-saving vehicle in Cyprus.
This appears to have been a recurring theme. After Kaliratov allegedly set up the shipping company, he gave Grace another complicated shakedown.
There’s no evidence the CRA ever came in and checked the company’s tax record.
Sources told the Atlantic News that the CRA only ever checked a car-parts factory a handful of kilometers away. The Canadian agency wouldn’t comment.
But some experts say the situation speaks to a larger problem in Canada.
“We have a problem in Canada right now in terms of compliance and enforcement,” said Larry Hales, a tax lawyer at Farber Palmer Hales LLP. “We need people to understand that we have a real problem in getting compliance.”