Nov 6, 2013

BC hospital P3 ownership moves to tax haven


One more of British Columbia’s public private partnerships (P3s) has headed on down the road to ownership in a European tax haven.  Bilfinger Berger Global Infrastructure completed deals last summer to acquire equity and loans for the Kelowna Vernon Hospital.  It is also buying out equity and loans on Alberta’s North East Stoney Trail highway P3 in Calgary.

Bilfinger Berger Global Infrastructure is incorporated in Luxembourg, a European tax haven.  The two purchases are worth £25.9 million.  The private partner for the hospital P3 was originally the Infusion Health consortium with financing provided by Bilfinger Berger Project Investments Inc. and John Laing Investments, joint lead developers and equity investors in Infusion Health KVH Ltd.

In 2011 the original Bilfinger Berger investor announced it was beginning to move its investments to the tax haven based Bilfinger Berger Global Investments.  The Kelowna-Vernon hospital deal follows similar previous transactions between the two Bilfingers for Golden Ears Bridge and Kicking Horse Canyon P3 investments.

One of the reasons this is important is that Partnerships BC considers the taxes paid by the private P3 partner when it is deciding whether or not to choose the public private partnership method of project development.  Partnerships BC claims these private sector taxes as an advantage of P3s, but what happens if the project is moved to a tax haven and taxes paid decline dramatically?

The international community is increasingly identifying tax havens and avoided taxes as a big issue.  Both the Organization for Economic Cooperation and Development (OECD) and the G20 have identified tax havens and corporate tax avoidance as major issues.  As the OECD reports:

 In an increasingly interconnected world, national tax laws have not kept pace with global corporations, fluid capital, and the digital economy, leaving gaps that can be exploited by companies who avoid taxation in their home countries by pushing activities abroad to low or no tax jurisdictions. This undermines the fairness and integrity of tax systems.

Not surprisingly, big companies are pushing back against more transparency, particularly objecting to the idea they report their profits and taxes on a country by country basis.

So how is BC reacting to this? What are they doing about the possibility the tax revenues they projected from P3s are disappearing into tax havens like Luxembourg?  As it turns out, absolutely nothing.  An earlier blog post found the Ministry of Finance in response to a Freedom of Information request asking about the impact of tax havens and P3s said “although a thorough search was conducted, no responsive records were located. Your file is now closed.”

Partnerships BC provided 75 pages of material in response to the same request. None of it dealt with the tax impact to government if a project moved to a tax haven.

Now one more BC public private partnership has seen its ownership move to Luxembourg.  What is the cost to taxpayers? Nobody knows and the results from FOI requests suggest the government isn’t looking.

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