Send this page to someone via email

A few weeks ago the question was whether the finance minister’s former firm could benefit from his decision on overseas tax treaties. Now, thanks to revelations that Bill Morneau still owns 2,271,691 shares in Morneau Shepell, the question is more personal.

Could Morneau himself stand to benefit from the review of overseas tax treaties his government is conducting?

Morneau’s former firm operates a subsidiary in the Bahamas. It has two full-time employees and it operates as Morneau Shepell (Bahamas) Ltd. It’s also registered in Barbados as of October 2016.

READ MORE: Finance minister Bill Morneau confirms he’s adjusting controversial tax proposal

Here’s where it gets interesting.

Canada and Barbados have a tax treaty. It was negotiated by Ottawa in 1980 and it makes setting up subsidiaries in Barbados very attractive to Canadian companies; the island remains a favourite destination for corporations like Morneau Shepell.

Story continues below advertisement

WATCH: Trudeau continues to fend off questions over Morneau’s finances

0:58 Trudeau continues to fend off questions over Morneau’s finances Trudeau continues to fend off questions over Morneau’s finances

Overall, Canadian corporations held nearly $80 billion in assets there in 2015.

Under the treaty, companies can funnel their profits through a Barbados-based subsidiary and utilize the country’s ultra-low tax rates. When we say ultra-low, we mean ultra-low – as in one to 2.5 per cent. When the income comes back to Canada, no taxes have to be paid. It’s quite the deal.

Representatives for Morneau Shepell insist the firm isn’t doing that.

“We do not channel revenue or profits from our Canadian-based business through our Bahamas office,” the company’s spokesperson told Global News in an email. “We are not repatriating profits tax free from the Bahamas to Canada.”

Dennis Howlett of Canadians for Tax Fairness says his organization’s own probe into the matter last year supports that claim.

Story continues below advertisement

“It would appear that it would have economic substance,” he said. “We determined that it was not a case where they were setting up a subsidiary in order to shift profits.” Tweet This

But according to Howlett, under current Canadian law, no company has to prove what’s known as ‘economic substance’.

“That’s a problem,” Howlett told Global News in an interview. “Other countries have brought in legislation like that…to close these loopholes.”

The federal government is currently reviewing overseas tax treaties – including the one with Barbados. So far, Morneau has said very little about where that review stands.

In a July interview with the Toronto Star, Morneau noted that any changes to tax treaties may take some time.

Such change “requires us to do some work,” Morneau said. “We’re going to do that work. But we’re not going to throw the baby out with the bath water.”

READ MORE: Bill Morneau requests meeting with ethics watchdog amid controversy

The caution expressed in those comments is a red flag for the Conservatives who want to know if Morneau is holding back on renegotiating the Barbados treaty because he will benefit with the status quo.

So Conservative MP Pierre Poilievre filed what’s known as an order paper question on the subject today, Order paper questions allow MPs to directly ask ministers questions on any number of subjects.

Story continues below advertisement

In the question, Poilievre asked if Morneau has been present for any meeting that included discussion of Barbados as a tax haven, and whether the finance minister informed the Ethics Commissioner his former firm had registered in Barbados.

The optics aren’t pretty, but the answers to those two questions will determine if there is an official conflict of interest. Morneau has to deliver a response within 45 days.

With files from Monique Scotti