A growing share of Canada’s investment overseas is being channeled by Canadian banks into tax havens.

The latest Statistics Canada figuresÂ show 24% of Canadian direct investment overseas in 2011 went to the top twelve tax havens, up from 10% in 1987.Â Â In fact,Â tax havens of the Barbados, Cayman Islands, Ireland, Luxembourg and Bermuda were five of the top eight national destinations of total Canadian investment abroad, with the US, UK and Australia the only countries not considered tax havens in this group.

These totals would be even higher if they included figures for other tax havens such as Monaco, Liechtenstein and many others where the figures either aren’t available or weren’t made available for confidentiality reasons.Â They also don’t include money going to tax havens associated with the UK and the US, such as Channel Islands, or through banks in those countries.

The finance and insurance sector now accounts for over 51% of Canada’s total direct investment overseas, more than double its share from 1987, more evidence that a large share of this money is going overseas to avoid taxes.Â Â The Harper government has lauded Canada’s growing investment overseas, claiming it shows looser foreign investment rules (which allowed numerous takeovers of Canadian industry) have been beneficial, but the actualÂ figures showÂ the reality is quite different.Â A large and growing share of thisÂ money isn’t goingÂ into real capital investments thatÂ could ultimately benefit peopleÂ overseas or in Canada; it’s going into tax avoidance that benefits aÂ wealthy few at the expense of the large majority in Canada and around the world.

Last month, James Henry–former chief economist of McKinsey & Co, the top corporate consulting firm in the world–released a report he wrote for the Tax Justice Network, The Price of Offshore Revisited, estimating that $21 to $32 trillion is held in tax havensÂ worldwide.Â Â This amounts to an estimated $190 to $280 billion of lost income tax revenues annually: more than twice the amount all OECD countries spend on international development assistance worldwide.Â Â Poor and developing nations are especially harmed by tax havens, as they are extensively used by political and corporate kelptocrats and multinationals operating in those countries to avoid taxes.

CBC’s The Current radio show had a very good interview with James Henry aboutÂ this issueÂ on Aug 16th and with Alain Deneault, the Canadian author of Offshore: Tax Havens and the Rule of Global Crime.Â Â Another major attraction of tax havens is of course their secrecy, which enables not just the wealthy to avoid taxes, but also criminals to both avoid taxation and prosecution.

Unfortunately, there isn’t much evidence our political leaders are doing much about this as the problem continues to grow.Â Â As Alain Deneault said, they always go after the smallÂ people on taxes.Â Â Meanwhile, high profile politcians such as former Conservative Finance Minister Michael Wilson chairs the Canadian operations of international banks such as UBS and Barclay’s that do a lot of business in tax havens — and recently refused to appear before Commons committees looking examining this issue.

The use of tax havens is also fuelled by and exacerbates growing inequalities of income and wealth: highly affluent individuals and corporations with a lotÂ of excess money they aren’t productively investing back into the economy or spending on their needs.Â Â Canadian banks have also been complicit in building up some Caribbean nations into tax havens–and use them to avoid billions in tax annually themselves, as Quebec economists Leo-Paul Lauzon and Marc Hasbani showed when they examined the annual reports of Canadaâ€™s big five banks a few years ago.

Canada’s House of Commons Finance Committee will be examining the issue of tax havens again this fall.Â It’s a growing problem with real consequences, especially as governments cut public spending ostensibly to tackle their deficits. Hopefully they will be able to make more progress this time and stem some of this flow.Â Otherwise the dirty little secrets of Canadian banks is going to grow a lot bigger.

Notes: Figures on FDI are from Statscan Cansim table 376-0051 (by country) and 376-0038 (by industry), available to download for free.Â The Congressional Research Service has aÂ list of countries considered tax havens in their relatively recent report on Tax Havens: International Tax Avoidance and Evasion.

(Revised 17 Aug)