EXCLUSIVE| Jim Love, Canadian Mint chairman, helped run offshore ‘tax-avoidance scheme’ for clients

“The chair of the Royal Canadian Mint, who also served as an adviser on international taxation to the federal Finance Department, helped engineer the transfer of millions of dollars of a prominent Canadian family through offshore tax havens in what others involved characterized as a ‘tax avoidance scheme,’ documents obtained by CBC News show.” Zach Dubinsky, Nicole Reinert, Sophia Harris, and Harvey Cashore of the CBC News reported last night that “slightly more than $8 million was moved through offshore entities in Bermuda, Barbados and Antigua, later prompting allegations that the arrangement, if exposed, could lead to potentially hundreds of thousands of dollars in ‘taxes, interest and penalties.’ The documents show there were also concerns about secrecy and instructions to shred files.” “The hundreds of records are part of a sprawling lawsuit against James Barton Love, a Toronto tax lawyer who chairs the mint’s board of directors, and others by descendants of former prime minister Arthur Meighen. Quietly settled in 2011, the lawsuit saw family members allege that the offshore transactions, which began in 1996, were unlawful and negligent and that Love ‘breached his fiduciary duties and acted oppressively.'” “Love countered in sworn statements that the offshore manoeuvres ‘resulted in significant savings of Canadian tax’ for Meighen’s heirs — an amount he estimated at $1 million.  He also emphatically denied any breach of trust and said he had ‘specifically advised’ there were risks to the offshore arrangement.  None of the allegations was ever tested in court.” Read the full article here.   | Raymond Matt, CFP, CLU, TEP, CHS

Survey finds Canadians carry more debt; but pay it off

“Canadians are carrying more debt now than a year ago, but it seems like many have a better handle on paying it back, says a newly-released study.  Statistics from credit monitoring firm Equifax Canada show that consumer debt, excluding mortgages, rose 3.7 per cent in the third quarter to $507.1 billion from $489 billion a year earlier, posted The Canadian Press on the Cbc’s website early yesterday morning.” “Despite the increase in debt load, however, the overall delinquency rate — bills more than 90 days past due — dropped to a record low of 1.13 per cent in the three months ended Sept. 20. That was down from 1.22 per cent in the same period last year.  ‘People are gaining confidence and they see they can maintain more or less their lifestyle yet are more aware of the financial choices they’re making,’ said Regina Malina, director of modelling and analytics at Equifax.” “Meanwhile, overall consumer debt, including mortgages, continues to grow. In the third quarter, Canadians owed $1.36 trillion, up from $1.3 trillion a year earlier.  Malina said the data shows that Canadians have more control over their debt — from car loans to credit card purchases — even though debt levels have continued to increase over the past few quarters.  ‘It’s not like we can relax and not pay attention to the pattern because delinquency is low, but the conclusion is that consumers have learned to behave more responsibly,’ she said.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

Not everyone sees a housing bubble; Flaherty may be keen to intervene

 “The doomsayers of the Canadian housing market got a fresh round of ammunition this week.  First, the Organization of Economic Co-operation and Development warned of the risk of a ‘disorderly correction’ in the Canadian real estate market. Then the credit-rating firm Fitch Ratings said the country’s residential prices are overvalued by 21 per cent. Homes in British Columbia, Ontario and Quebec, where prices are apparently inflated by a whopping 27 per cent, are viewed as the most vulnerable to a correction, reported Sophie Cousineau of The Globe and Mail on Friday, November 22nd, 2013.”

 “The news made for striking graphics: Growing condo towers evoked overstretched homeowners and tottering housing markets. It’s actually surprising ‘for sale’ signs didn’t spring up all over, turning the latest headlines into a self-fulfilling prophecy. (Mind you, this might still happen.)  And so it is that bubble talk is fizzing once more in Vancouver, Calgary and Toronto. But as bubbles are only recognized as such after they burst, you can never be certain they exist until it’s too late.”  “If there are experts in bubble spotting, then surely Robert Shiller, the U.S. economist who foresaw the tech bubble of 2000 and the American housing collapse, is one of them. But even the author of Irrational Exuberancedoesn’t venture that far where Canada’s housing is concerned.  ‘Toronto prices keep going up. They have increased almost as much as New York prices ever did,’ the Nobel-prize winner told a crowd of chartered financial analysts in Montreal two weeks ago. He went on to compare prices in Canada and the United States with graphs that support his view of troubling signs of ebullience in Canada. Yet, when asked point blank, the Yale professor stopped short of calling it a bubble – unlike the prediction he made in September in Brazil about that country’s housing market, which did not sit well with Brazilians.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS  

Starting July 1, banks must look for markers that identify accounts belonging to Americans

“Starting next July, Canadian banks will be required to ask anyone opening a new account if they are now, or ever have been, an American ‘person’.  It comes at the behest of the U.S. government and its efforts to ‘smoke out’ tax dodgers.  The Foreign Accounts Tax Compliance Act, or FATCA, was passed by the U.S. Congress in 2010 and comes into force July 1, 2014”, wrote James Fitz-Morris of the CBC News, early this morning. “The law forces all banks and other financial institutions outside the U.S. to search for customers who have certain ‘indicia’. Those are markers that show the person may be a U.S. citizen or a former permanent resident who, under U.S. law, must file income tax returns to Uncle Sam no matter where they reside in the world.  The only other country with similar tax rules for expats is Eritrea. When announcing the law, U.S. President Barack Obama said,’if financial institutions won’t cooperate with us, we will assume they are sheltering money in tax-havens and act accordingly’.  ‘The threat is a withholding tax of 30 per cent levied on every transaction a non-compliant bank has coming from, or even passing through, the U.S.  Bottom line is: there is absolutely no way that a large, modern financial institution like a Canadian bank or a large credit union could escape FATCA,’ says Marion Wrobel, vice-president of policy and operations at the Canadian Bankers Association (CBA).” “Wrobel says his organization has been fighting FATCA since it was announced, calling it the ‘extra-territorial’ application of American law.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

Yellen Defends QE as Economic Benefit in Letter to Senator

“Janet Yellen, the nominee for Federal Reserve chairman, defended the central bank’s bond purchases in a letter to a U.S. senator, saying they boosted economic growth and provide benefits that exceed the risks.  ‘By putting downward pressure on longer-term interest rates and helping to make financial conditions more accommodative, the Federal Reserve’s asset purchases have supported a stronger economic recovery, improved labor-market conditions and helped keep inflation closer to its 2 percent objective,’ Yellen said in a Nov. 18 response to questions from Senator David Vitter, a Republican from Louisiana.” “In a separate letter to Senator Elizabeth Warren, Yellen said ‘monetary policy is likely to remain highly accommodative for a long time,’ even after the Fed reaches thresholds for considering an increase in the main interest rate.  Yellen, at a Nov. 14 confirmation hearing, told the Senate Banking Committee she’s committed to promoting a strong recovery, reducing 7.3 percent unemployment and ensuring stimulus isn’t removed too soon. The Fed has held the main interest rate near zero since December 2008 and pumped up its balance sheet to a record $3.91 trillion through bond purchases.” “Yellen said in her Nov. 18 letter to Warren that the Federal Open Market Committee’s pledge to keep the main interest rate exceptionally low as long as the unemployment rate exceeds 6.5 percent should be considered a threshold, not a trigger for action.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

Bernanke Signals Fed Target Rate to Stay Low After QE

“Federal Reserve Chairman Ben S. Bernanke said the Fed will probably hold down its target interest rate long after ending $85 billion in monthly bond buying, and possibly after unemployment falls below 6.5 percent.  ‘The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after’ the jobless rate breaches the Fed’s 6.5 percent threshold, Bernanke said yesterday in a speech to economists in Washington. A ‘preponderance of data’ will be needed to begin removing accommodation, he said.” “In deciding when to wind down open-ended purchases of bonds, Fed officials are weighing both the ‘cumulative progress’ since they began the program in September 2012 as well as ‘the prospect for continued gains,’ Bernanke said. The labor market has shown ‘meaningful improvement’ since the start of the program.  Policy makers are debating how to slow the pace of asset purchases without causing a surge in interest rates that could jeopardize the more than four-year economic expansion. Central bankers have sought to convince investors that tapering bond purchases wouldn’t signal that an increase in the benchmark interest rate is any closer.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

Bitcoin Gets Its Day in the Limelight

“Bitcoin was so off the radar a year ago that Bank of Canada Governor Stephen Poloz knew nothing of the virtual currency until it was woven into the plot of a popular American television show.  ‘I first heard about it on The Good Wife,’ Mr. Poloz said during a September visit to the central bank’s Calgary office, referring to the CBS legal drama, which produced an episode inspired by the mysterious origins of Bitcoin in early 2012, wrote Kevin Carmichael of the Globe and Mail, Monday, November, 18th.” “The virtual currency took another step away from the margins of the financial system Monday, as the U.S. Senate homeland security and governmental affairs committee set aside a good chunk of the afternoon for testimony on whether the private – and largely anonymous – payment system requires special regulatory scrutiny. It was the first time a congressional committee had conducted hearings on digital currencies. There are about 12 million Bitcoins in circulation, which are used by Internet consumers to pay for everything from gourmet coffee to teeth whitening. While some investors see the currency as a store of wealth along the lines of gold, detractors flag Bitcoins’ attractiveness to criminals: Transactions on Silk Road – the online marketplace for drugs and other illicit goods and services, such as murder-for-hire, that U.S. authorities closed earlier this year – were done in Bitcoin.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

Tories paving the way for promised big-ticket tax cuts

“The Conservative government will squeeze public-service salaries and sell off government assets to enter the next federal election with a budget surplus of at least $3.7-billion, paving the way for promised big-ticket tax cuts,” Bill Curry of the Globe and Mail wrote yesterday. “Finance Minister Jim Flaherty’s economic update Tuesday reflects the political motivation driving the Conservative government’s push to show an election-year surplus. And it comes as the Tories, a government that has branded itself as economic stewards, struggle to put the Senate expenses scandal behind them.  In his last budget, Mr. Flaherty projected a 2014-15 deficit of $6.6-billion, and a modest surplus of $800-million a year later.  But Mr. Flaherty is now ahead of schedule, raising the estimated surplus for 2015-16 to $3.7-billion. There are also several conservative assumptions in the numbers, meaning the surplus could easily come in higher than currently planned.  The federal spending plan includes several factors that could easily plump up Ottawa’s bottom line, allowing the Conservatives to deliver on tax cuts that were promised during the 2011 election but were contingent on balanced books. Those promises include income splitting for parents and new and expanded fitness tax credits.  Mr. Flaherty, who reiterated that he plans to run in the next election, said the government must get its financial house in order before it commits to tax cuts.” Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS

BlackBerry receives $70M in financing from Manulife Financial

“Manulife Financial Corp. has become the latest big-name investor to buy into a $1-billion bond deal for struggling smartphone maker BlackBerry.  The addition of the insurance company was disclosed in an amended filing with the U.S. Securities and Exchange Commission by Fairfax Financial Holdings Ltd., which is leading the debt financing.  Manulife is investing $70 million under the deal”, wrote The Canadian Press for the CBC News Friday evening (November 8th). “Markel Corp. and Brookfield Asset Management Inc. both pared back their planned investment in the bond offering to make room for Manulife.  Other investors include Mackenzie Financial Corp., Canso Investment Counsel Ltd. and Qatar Holding LLC”. Read the full article here. |Raymond Matt, CFP, CLU, TEP, CHS  

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