Former finance minister Carlos Leitão, who was in charge when Quebec injected 188 million into a subsidiary of Davie in 2018, admits that his government never paid too much attention to the presence of the shipyard owners in a tax haven.
Posted at 5:00 a.m.
“Me and my firm, we never stopped too much to try to verify who were the ultimate beneficiaries, the financial structure around the company, because in our vision, the company was not profitable, a- he said in an interview to The Press. They weren’t making a profit, they were even technically bankrupt at times. Maybe it should have interested me, but it never did. »
The Press revealed on Monday that the owners of the Lévis shipyard had discreetly modified the structure of the company in 2020, during negotiations with Ottawa, in order to win at least 10 billion in federal contracts for the construction of several icebreakers.
They moved the controlling company from the British Virgin Islands, considered one of the most opaque tax havens on the planet, to the island of Guernsey, where the tax rate offered to most companies is 0%. .
PHOTO EDOUARD PLANTE-FRÉCHETTE, LA PRESSE ARCHIVES
Carlos Leitão, former Minister of Finance of Quebec and Official Opposition Critic for Public Finance, 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 Tax Justice Network, the American Congress and the European Observatory of taxation, but what the owners of Davie are defending.
According to our information, Investissement Québec (IQ) has approved the move of Davie’s control company to Guernsey in the summer of 2021, once the transaction has already been completed. IQ had to give the green light to any change in the yard’s shareholding because of the millions it has lent to its owners over the years.
The current Minister of Finance, Eric Girard, says he has not been “personally involved” in the file. During a press briefing Monday in Quebec, he pointed out that “it’s the federal government that gives the contracts, there was a diligent review that was done and we made sure that the company will pay taxes in Quebec. and in Canada, if there are profits”.
Eric Girard clarified that Investissement Québec reports to the Minister of the Economy, Pierre Fitzgibbon. The latter did not wish to comment, referring us to the response of his colleague from Finance.
“Very political” file
Carlos Leitão, for his part, recalls that Davie’s file has always been “very political” for all the ministers who have succeeded one another in Finance. “The objective was always to save jobs, so we did not necessarily look at all the contours of the transaction or the company,” he specifies.
Governments pumped so many millions into the yard over the years that it became somehow impossible to back down, he adds.
Once the State comes in and commits to this support for a company that becomes too big to failwe end up accepting things that are even in contradiction with our public policies, namely to better circumscribe the use of tax havens.
Carlos Leitão, former Minister of Finance of Quebec
Carlos Leitão says he is still “really proud” of the 188 million investment made by IQ in a subsidiary of Davie, which leases the MV tanker Asterix to the Royal Canadian Navy. Quebec thus acquired a 30% interest in the project.
“They were really going to close, it was almost the end; we concocted this structure in Finance where the government became a shareholder in this boat, theAsterix, he recalls. At least it had done well and it worked well. The Government of Quebec, by becoming a shareholder of this asset, it made us feel secure and it improved their cash flow. They were really down to the last cartridges. »
Correcting a “historical error”
Ottawa began formal talks with Davie shipyard in December 2019 to include it in its National Shipbuilding Strategy, alongside Irving shipyards in Halifax and Seaspan in Vancouver. The discussions reached a new stage, in June 2022, with the start of formal negotiations to sign a “framework agreement” by the end of the year.
If negotiations are successful, Davie could get $10 billion in federal contracts, which should provide work for its employees and contractors for more than 20 years. The Trudeau government says it wants to fix the “historic mistake” that was made when Davie was excluded from the first round of contract awards a decade ago.
James Davies, president and CEO and co-shareholder of the shipyard, says that the structural change made is in no way intended to pay less tax. The Briton, who bought Davie in 2012 with his compatriot Alex Vicefield, also believes that Guernsey does not meet 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 not aware of the structural change made by the group’s shareholders in 2020. She stressed on Monday that she “trusts the concerned and competent authorities who carry out due diligence on companies” and “reiterates the importance of the Chantier naval de Lévis, which is a major company for the workers of Lévis, Bellechasse and for the many suppliers throughout Quebec”.
With the collaboration of Charles Lecavalier, The Pressin Quebec