Canada Is Like A Swiss Bank Account
The Globe and Mail reports from Canada. “Demetre Lazos says he couldn’t just stand by and watch real-estate speculation, as he puts it, destroy his city. Convinced that his boss, a local speculator, was dodging taxes and misleading lenders, he decided to act, approaching both the police and the Canada Revenue Agency (CRA) to divulge what he knows. Mr. Lazos, who has built luxury homes in Vancouver for three decades, offered documented evidence of possible fraud and tax evasion.”
“And yet, as he tells it, both the cops and the tax men blew him off: A CRA official who met him in the lobby of the agency’s downtown office told him to write to Ottawa; at Vancouver police headquarters, he was advised to call the Crime Stoppers hotline. (He did, he says, and got no results.) I am very angry at the system,” says Mr. Lazos, who has since quit his job. ‘I love this country – and it is my country – but I think we are Mickey Mouse.’”
“And so, next, he came to The Globe and Mail and, over the course of several months, delivered a large, and disturbing, cache of documents that expose how speculators can maximize – and conceal – their profits. As a result of Globe investigations into Vancouver’s supercharged real-estate market, others have come forward, too, including a federal tax auditor, as well as an accountant who says he regularly files tax returns for wealthy clients who buy and sell houses – and appear to declare far less than they earn. ‘Canada,’ he says, ‘is like a Swiss bank account’ for his clients.”
“Ottawa says it is studying the issue, and B.C. has brought in a tax on foreigners who buy residential real estate in Vancouver. But those who see firsthand how real estate is traded like stocks and bonds say this isn’t nearly enough. ‘We have governments that are not doing their job,’ argues Mr. Lazos, who acquired his inside knowledge while working for Jun Gang Gu, also known as Kenny Gu, a former civil servant originally from Nanjing, near Shanghai.”
“He started out here as a developer, but the documents show that his business evolved to buying homes – using other people’s money– and then flipping them. His deals are financed with investor money from China and mortgages issued to those investors by Canadian banks. A Chinese-Canadian accountant in Vancouver estimates that he has filed tax returns for 1,000 clients in the past five years. He does not want to be named because he fears repercussions, but says the CRA is partly to blame for lost revenue, because it doesn’t require taxpayers to report the sale of any principal residence.”
“‘Every one of [those client families] has more than one house – two, three, four, sometimes more,’ he says. ‘They don’t have to tell me. The CRA says they don’t have to tell anybody.’”
“Another Vancouver accountant told The Globe that she and her colleagues see questionable real-estate transactions all the time, which they believe have contributed to skyrocketing prices. ‘This has become a huge mess. You have no idea how angry I am,’ says Corina Ciortan. ‘A generation of people has been screwed. It’s so obvious. Everyone I work with is so angry because there is a select group of people who have profited from this. ‘”
“A CRA auditor who came forward to The Globe with concerns about enforcement said that that is barely scratching the surface of the dodging going on. ‘CRA will catch very few people, because the [inexperienced] auditors … have no idea of foreign income and how individuals hide income,’ says the auditor, who requested anonymity, for fear of being fired.”
“‘Management has known of this issue for at least three years but did not want to pursue the real-estate flips, because most of the auditees were Chinese in descent. They were scared of being racist … I can confirm this fact, based on meetings held.’”
“In addition to holes in the tax system, speculators like Mr. Gu also rely heavily on Canadian financial institutions to give their clients multimillion-dollar loans. ‘They are using this money temporarily – to make more money – instead of using their own money,’ Mr. Lazos says. ‘Then prices go up. We are making the bank richer and the Canadians poorer.’”
“Mr. Lazos says that his whistle-blowing will be worth it only if it jolts Ottawa and B.C. into action. And his reasons, at least in part, lie close to home: ‘I hate the fact that for my daughter and my grandchildren, there is no way they can own a house in this city.’”
