Watchdog report accuses firm of ‘dodging’ taxes

Brookfield Corp. disputes claims of international tax avoidance

A new report from an international tax watchdog raises questions around Canadian asset management giant, Brookfield Corp., accusing the firm of “dodging” taxes around the world.

The Centre for International Corporate Tax Accountability and Research

(CICTAR) released the report Tuesday, which alleges the firm engages in tax avoidance and challenges the company on its claim to be a responsible and sustainable investor.

“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,” the report reads. “And there is an apparent pattern of aggressive tax avoidance consistent across its global operations.”

Brookfield disputes the claims, saying in an email to the Star “we are committed to providing relevant and proportionate disclosure about our tax payments in accordance with recognized reporting

frameworks and in a manner that is both informative and transparent.”

The company manages about $800 billion worth of assets worldwide, earning a reported $424 million (U.S.) in net income in the first quarter of this year, a sharp decrease for the same quarter last year when it made more than $2.96 billion.

A 2017 report on corporate taxes in the Star said Brookfield, then Brookfield Asset Management, had a $5.3-billion tax gap and paid an average tax rate of 6.1 per cent.

Tuesday’s report from CICTAR is titled Brookfield’s Bermuda Base: is Canada’s Largest Alternative Asset Manager Dodging Global Taxes? It focuses on four case studies using Brookfield ventures. Among them is Brookfield’s interest in London’s Canary Wharf Group.

Despite $700 million (Canadian) in operating revenue for the real estate group, the report says, it only paid about $19 million in taxes in 2021. CICTAR questions if a complex corporate structure of partnerships — it says Canary Wharf Group has hundreds of subsidiaries — could be used to help lower the amount of taxes being paid.

“While there is no suggestion in this case that these structures have been used for anything of this nature, there are questions to be asked as to the purpose of this level of complexity for owning and managing premium London properties,” it reads. “Brookfield also uses a range of other transactions — including placement notes and shareholder loans — to transform Canary Wharf’s taxable income into untaxable income.”

The report also looks at Brookfield’s interest in Healthscope, a private hospital operator in Australia run out of the Cayman Islands.

Brookfield’s acquisition of public assets and the taxes paid on them are examined in the report as well. It specifically looks at the purchase of Colombian electricity company ISAGEN from that government and Brazil’s water and wastewater management firm, BRK Ambiental.

But Brookfield said it openly discloses its taxes in accordance with international financial reporting standards and in some cases the amount paid can be misleading.

“For example, in line with IFRS accounting standards, we report our income to include noncontrolling ownership interests, whereas our reported tax provision includes only our proportionate share and not the share attributable to our investment partners,” an emailed statement to the Star read.

The company also said it files a country-by-country tax report to revenue Canada that is shared with the Organization for Economic Cooperation and Development who in turn share it with member countries where Brookfield is operating.

“Our investments consist of businesses that own and operate critical infrastructure, renewable energy and real estate assets all over the world,” Brookfield said. “These assets are owned by corporate subsidiaries in their local jurisdictions where all applicable corporate income taxes are paid in compliance with local tax laws.”

Despite Brookfield’s assertions, CICTAR’s report concludes with a demand Brookfield adopt more transparent practices. The watchdog says that some Brookfield shareholders are also asking for a more transparent structure and have proposed a resolution to require the company to implement the Global Reporting Initiative tax standard.

Brookfield has opposed the resolution, CICTAR says, quoting a response from Brookfield saying it doesn’t believe the company has any “tax-related negative impacts” on human rights, the economy or environment among other concerns.

“Given the findings and questions raised in this report, on just a handful of case studies out of the hundreds of companies owned by Brookfield, there do seem to be questions to be asked,” it says. “If, however, the statement is correct, then Brookfield’s executives and management should have nothing to fear from greater transparency.”