The Caisse de depot et placement du Québec (CDPQ) has just announced with great fanfare a major investment together with a partner from Dubai in the Jebel Ali free zone, where corporate taxation is zero.
La Caisse and DP World, a port operator in the United Arab Emirates (UAE), will jointly invest US$6.3 billion (US$3.1 billion for la Caisse) in this joint venture. The Quebecers’ woolen stocking will hold 22% of an industrial park and the port of Jebel Ali.
But the Caisse is also acquiring stakes in the Jebel Ali Free Zone, “the largest in the Middle East,” where there are 150 Fortune 500 companies, according to CDPQ’s press release issued today.
Companies and individuals at 0%
However, this tax haven-like free zone has already attracted 8,700 companies with favorable taxation and a lenient regulatory environment.
On Jebel Ali’s website, consulted by The newspaperit’s the big magic business and we promise 0% corporate tax for 50 years and 0% personal income tax.
This investment in the United Arab Emirates and in particular in the free trade zone surprises Franck Jovanovic, Professor of Economics and Finance at TÉLUQ University.
“It is clearly a tax haven, that is well known. Also, the UAE has often been singled out for money laundering issues and is not transparent. The fund’s decision is surprising, I’m at a loss,” he analyzed in an interview The newspaper.
For him, the Quebec institution should lead by example, and this investment sends the wrong message. “It’s as if they were saying: it’s more important to make money grow than to respect ethics,” he specifies.
This investment also appears to contradict what the great head of the Caisse de depot, Charles Emond, said about tax havens.
Last year, speaking to elected officials in Quebec, Mr Emond said he was willing to sell investments, even at a loss, in companies that are not paying their fair share of taxes.
All laws respected
Interviewed by The newspaper, The institution has not directly commented on the free zone’s acquisition, but says it “respects all laws and fulfills its tax obligations.”
“Our joint venture is expected to be taxed at 15%,” spokeswoman Kate Monfette said.
DP World “is not subject to income tax on its operations in the UAE, but its international subsidiaries do pay taxes,” the Caisse also points out.
In general, the CDPQ emphasizes that the port is a hub for world trade. More than 150 Quebec and Canadian companies operate in Dubai, including CAE and Couche-Tard.
– With the collaboration of Pascal Dugas-Bourdon
What is a free zone?
A free zone is a geographic area of a territory that offers tax advantages. This can be, for example, tax exemptions on company profits, tax reductions for private individuals or exemptions from customs duties. The aim is to attract investors and develop economic activities in an area that the authorities consider a priority. Free zones are often found in major ports or near borders.