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Meanwhile, In Canada: Rich Guys Are Still Fighting the Tax Man Over Their KPMG Offshore Tax Shelter

KPMG is in the news again this week, and again it’s for something they probably wish would go away. Now, I combed our extensive archive going back 10 years (read: spent five minutes Googling) and wasn’t able to find any coverage of this case save for an ANR link here and there, which means either there is too much other tomfoolery going on at KPMG for us to report on all of it all the time or we’re bad and hate Canada. Maybe a little from Column A and a little from Column B. Anyhoo, let’s get caught up.

In the late 1990s, KPMG’s Vancouver office came up with the bright idea to help a handful of rich clients “save money” on taxes otherwise due to the Canadian Revenue Agency, as well as potential future jilted soon-to-be-former spouses, through a tax shelter. In documents revealed to Parliament in 2016, KPMG had its people really pushing that jilted spouse thing.

From CBC:

In what was called the “initial client meeting script,” KPMG sales agents were advised to discuss the “primary benefits” of the scheme with wealthy Canadians.

The list of benefits included a section promoting “asset protection” which, according to KPMG, meant there would be “nothing” that an “ex­-spouse” could claim.

Steven Benmor, a Toronto­-based family law specialist, says those talking points are “potentially damaging” to KPMG, as the firm appears to be endorsing the idea of getting around Canadian divorce laws.

The question of course becomes, who is gonna get more ticked by some rich dude hiding money, the tax man or the ex-wife?

In October 2012, authorities — since hip to the tax dodge — ordered KPMG to preserve all documents related to their probe of the tax shelter. The following month, four Isle of Man shell companies set up by KPMG passed a resolution that “books, documents and all papers” be “destroyed,” according to records in the Isle of Man obtained by CBC/Radio-Canada.

Seven years on, the government is still trying to scrape up whatever documents they can related to the scheme and the filthy rich folks who bought into KPMG’s promotion of it. Two such rich bastards are Caleb and Tom Chan, billionaire brothers from Hong Kong whose $40 million donation to the Vancouver Art Gallery is considered the largest private donation to the arts the province has ever seen. No one is doubting their generosity, however, tax authorities are questioning their participation in the “Isle of Man” tax shelter sold to them by KPMG.

CBC reports:

Numerous internal emails filed in court this summer reveal the Chans’ involvement in a KPMG offshore scheme so secret that neither tax collectors nor even their spouses were ever supposed to find out.

The Chan brothers may be the most prominent of several wealthy families whose identities have been revealed over the past few years as being part of the scheme.

The records show the Chan brothers were part of a group of more than 20 wealthy Canadians whose families had at least $5 million to invest in a sophisticated KPMG tax dodge first developed out of the accounting firm’s Vancouver office in the late 1990s.

In one email from 2002, a KPMG accountant explained the Chan brothers did not want their spouses to learn about their offshore dealings.

“The concern is that the wifes [sic] are not to know about the assets of the husbands,” said the accountant’s email.

In the Isle of Man, where the shell companies were set up, the response was to “rest assured” that the Chans’ partners would not find out.

The documents show tax authorities were also not supposed to find out. The court records show the Chans did not disclose their offshore companies in the Isle of Man during a 2005 audit, even after being required to list all their global assets.

The Chans are currently cockblocking CRA from accessing more than 1,000 documents in KPMG’s possession, citing solicitor-client privilege. Additionally, authorities have requested general ledgers from the Chans’ offshore companies; however, in 2017 Caleb Chan told auditors he had no such thing.

No one knows exactly how much money escaped tax authorities through the “Isle of Man tax dodge,” but it could number in the tens of millions.