14/06/23

INTERNATIONAL TAX: Brookfield faces UK scrutiny over Bermuda tax practices

As published on: royalgazette.com, Monday 12 June, 2023. 

Brookfield, the giant Canadian company about to change the face of the City of Hamilton with a massive redevelopment, is facing scrutiny in London over its Bermuda tax practices.

A new report from the Centre for International Corporate Tax Accountability and Research says Brookfield, the owner of Canary Wharf in London and Manhattan West in New York, pays consistently low rates of tax and exploits global tax havens and loopholes.

The June report poses a provocative question in its title — Brookfield’s Bermuda base: is Canada’s largest alternative asset manager dodging global taxes?

The report emerged virtually on the eve of a shareholder vote on Friday on public country-by-country reporting.

If shareholders have voted for Brookfield to implement the GRI tax standard, investors can shed light on global operations and potential risks.

The Global Reporting Initiative offers multinational groups a voluntary tax-reporting framework to publicly disclose receipts in every country where the business operates.

The International Tax Review quoted a Brookfield spokesman: “We are committed to providing relevant and proportionate disclosure about our tax payments in accordance with recognised reporting frameworks and in a manner that is both informative and transparent.”

The ITR commented: “Brookfield files a country-by-country report with the Canada Revenue Agency, which shares the information with other OECD jurisdictions where the company operates. However, this data is not publicly available.”

The Canadian company is just the latest in a growing list of businesses, including Amazon, Cisco Systems and Microsoft, to hold a shareholder vote on the GRI standard.

Meanwhile, the 36-page CICTAR report states: “Brookfield’s structure has been described as a cascading ownership pyramid, with local subsidiaries controlled by complex chains of foreign entities with direct investments through individual investment funds ultimately winding up in Bermuda.

“The small Caribbean Island nation levies no taxes on profits, income, dividends, or capital gains, has no limit on the accumulation of profit, and has no requirement to distribute dividends.

“The Bermuda Government recently legislated to extend the tax exemption on income and capital gains for its registered companies until March 31, 2035.

“In addition to its key subsidiaries in Bermuda, Brookfield has dozens of subsidiaries registered in tax havens including the Cayman Islands, British Virgin Islands, Gibraltar, Malta, Jersey, Singapore, Hong Kong, Luxembourg, the Isle of Man and others.“

“As of January 1, 2023, Brookfield Asset Management was ranked as the fifth-largest corporation in Canada, with a market capitalisation of over US$71 billion.“

The report notes that Brookfield is not a household name, but many of the landmark assets it controls around the world, such as Canary Wharf in London and Manhattan West in New York, are widely known.

Its private equity arm owns a global lottery company that operates government-sponsored lotteries (and sports betting) in 50 countries around the world and is “the largest lottery systems provider in Europe and the fastest-growing in the US.

CICTAR claims Brookfield’s track record of alleged tax dodging has received some attention in Australia and Canada, where it may claim the title of Canada’s top tax dodger. And there is an apparent pattern of aggressive tax avoidance consistent across its global operations.

The report says Brookfield’s use of tax haven structures appears to have intensified since the Panama Papers.

It states: “In Bermuda alone, a current search of the Registrar of Companies for entities beginning with Brookfield produces 266 results, including many like Brookfield Australia Infrastructure Holdings (Brookfield AIV), LP and Brookfield Australia Infrastructure Holdings (Bermuda), LP, which are clearly linked to investments in other countries.

“There may be hundreds of other Brookfield-controlled entities in Bermuda under other names that do not begin with Brookfield.

“In contrast, Brookfield Corporation’s 2022 annual report lists only four subsidiaries, Brookfield Asset Management ULC in British Columbia and three limited partnerships in Bermuda.“

The report does publish a statement from Brookfield in rebuttal, in which the company says it is a responsible investor advancing a sustainable green economy.

It says it is committed to providing relevant and proportionate disclosure about tax payments in accordance with recognised reporting frameworks.

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International Tax Brookfield Place Bermuda