Davie Shipyard | Ex-Minister Leitão admits that the use of tax havens hasn’t worried Quebec too much

Former Treasury Secretary Carlos Leitão, who called the shots when Quebec pumped $188 million into a Davie subsidiary in 2018, admits his government has never paid too much attention to the shipyard owners’ presence in a tax haven.

Posted yesterday at 5:00am

Maxim Bergeron

Maxim Bergeron
The press

“Me and my company, we never stopped trying too hard to verify who the ultimate beneficiaries were, the financial structure around the company, because in our vision the company wasn’t profitable,” he said in an interview with The press. They didn’t make a profit, they were even technically bankrupt at times. Maybe I should have cared, but it never did. »

The press revealed on Monday that owners of the Lévis shipyard had discreetly changed the company’s structure in 2020 during negotiations with Ottawa to win federal contracts worth at least $10 billion to build several icebreakers.

They moved the controlling company from the British Virgin Islands, considered one of the world’s most opaque tax havens, to the island of Guernsey, where the tax rate offered to most corporations is 0%.


PHOTO EDOUARD PLANTE-FRÉCHETTE, LA PRESSE ARCHIVE

Carlos Leitão, former finance minister of Quebec and official opposition critic of public finances, photographed in August 2022.

For Carlos Leitão it is “clear” that Guernsey is a tax haven. An analysis shared by several organizations and institutions, including the Tax Justice Network, the American Congress and the European Observatory of Taxation, but which Davie’s owners are defending.

According to our information, Investissement Québec (IQ) has approved the relocation of Davies’ controlling company to Guernsey in the summer of 2021, having already completed the transaction. IQ had to give the green light to a change in the shipyard’s stake as it has loaned its owners millions over the years.

Current Treasury Secretary Eric Girard says he was not “personally involved in the file”. During a press conference on Monday in Quebec, he pointed out that “it is the federal government that awards the contracts, a careful review has been carried out and we have ensured that the company will pay taxes in Quebec and, where appropriate, in Canada on profits”. .

Eric Girard clarified that Investissement Québec reports to Minister of Commerce Pierre Fitzgibbon. The latter declined to comment, referring to the response from his finance colleague.

“Very political” acts

For his part, Carlos Leitão recalled that Davies’ file was always “very political” for all finance ministers. “The goal has always been to save jobs, so we didn’t necessarily look at all the contours of the transaction or the company,” he specifies.

Governments have poured so many millions into the court over the years that it’s kind of been impossible to back down, he adds.

Once the state comes in and commits to that support for a company that will too big to failFinally, let’s accept things that are even contrary to our public policy, namely to better restrict the use of tax havens.

Carlos Leitão, former finance minister of Quebec

Carlos Leitão says he’s still “really proud” of IQ’s €188m investment in a subsidiary of Davie that leases the MV tanker asterix to the Royal Canadian Navy. This gave Quebec a 30% interest in the project.

“They really wanted to close, it was almost the end; We hatched this structure in finance, where the government became a shareholder in this boat, whichasterix, he recalls. At least it was well made and it worked well. By having the Quebec government take ownership of this asset, we felt secure and improved their cash flow. They really were down to the last shell. »

Correction of a “historical error”

Ottawa entered formal discussions with Davie Shipyard in December 2019 to include it in its national shipbuilding strategy alongside Irving in Halifax and Seaspan in Vancouver. Discussions entered a new phase in June 2022 with the start of formal negotiations to sign a “framework agreement” by the end of the year.

If negotiations succeed, Davie could get $10 billion worth of federal contracts that should offer his employees and contractors more than 20 years of work. The Trudeau government says it wants to fix the “historic mistake” made when Davie was excluded from the first round of contract awards a decade ago.

James Davies, President and CEO and co-owner of the shipyard, says the structural change made is by no means designed to reduce tax payments. The Brit, who bought Davie alongside compatriot Alex Vicefield in 2012, agrees Guernsey doesn’t fit the definition of a tax haven.

Dominique Vien, Conservative MP for the Riding of Bellechasse–Les Etchemins–Lévis, where the Davie shipyard is located, was unaware of the structural change in the group’s shareholders in 2020. She stressed on Monday that she “trusts those concerned and competent authorities who examine companies with due diligence” and “reaffirms the importance of the Chantier naval de Lévis, which is an important company for the workers of Lévis, Bellechasse and for the many suppliers is throughout Quebec”.

In collaboration with Charles Lecavalier, The pressin Quebec

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