The University of Toronto (U of T) was revealed to hold investments in offshore tax havens in the latest document leak by the International Consortium of Investigative Journalists (ICIJ) called the Paradise Papers.
The university was one of more than 100 prestigious colleges and universities revealed by ICIJ to be in the offshore law firm Appleby’s client database.
According to the document, the U of T’s pension fund is a shareholder in WLR IV Loans AIV Feeder (Cayman) Ltd., located in the Cayman Islands.
According to the Toronto Star, the investments are not listed in the U of T’s annual pension and endowment statements. The investment doesn’t appear in the university’s financial statements because it represents less than one per cent of the pension fund’s total assets, according to a written statement from the university.
According to the ICIJ website, investments in offshore entities are “perfectly legal.” They added that they’re publishing the information in the public interest.
“Even when it’s legal, transparency advocates argue that the use of an alternative, parallel economy undermines democracy because it benefits a few at the expense of the majority,” the website reads.
The website also notes that extensive reporting by the ICIJ and its media partners for more than five years revealed that the anonymity granted by the offshore business facilitates money laundering, tax evasion, fraud and other crimes.
Michael Smart, a tax expert and professor in the U of T’s department of economics, told The Varsity that the university is a tax exempt institution and does not pay taxes on its investment income, whether those assets are located in Canada, or other countries including tax havens.
He said that many investment funds and private equity firms are now located in tax havens because their managers receive tax advantages there.
“They are probably also there because some of those funds’ clients prefer the secrecy of tax havens and they may not be fully reporting their income to tax authorities in their home countries, where tax may be due on their offshore investments,” Smart said.
Len Brooks, a professor of business ethics and accounting at the U of T’s Mississauga campus, told The Varsity that because it is legal, the issue become “mostly about optics.”
“There are some who would argue that if you earn money in a state, then you should be leaving some tax to be paid in that state,” Brooks said. “And if the company was not doing that, then some of the supporters of the university might find it unattractive, and some of those may find it sufficiently unattractive to withdraw their support for the university.”
The U of T’s investment policies have to be reviewed regularly and then reported on by advisors, Brooks said.
“But there are fundamental issues that the university needs to reflect upon and conceivably build into its policies,” he added.
Althea Blackburn-Evans, the director of media relations at the U of T, told The Varsity that the university has a duty to invest and grow the funds they make on behalf of the faculty members and that the U of T makes the most of the donations they receive for “the ultimate benefit.”
Blackburn-Evans also claimed that 47 per cent of the university’s $2.6 billion endowment goes to student aid, research, teaching and new academic programs to support more than 85,000 students.
The endowment is managed by the University of Toronto Asset Management Corporation, which also makes offshore investment decisions, according to The Varsity.
Walid Hejazi, associate professor of economic analysis and policy at the U of T’s Rotman School of Management told the CBC that these investments help Canadian institutions take part in the global economy and it helps with Canadian employment.
