Canada

Canada Hid A Foreign Capital & Housing Study While Dismissing Intelligence Warnings

Canadian tax authorities confirmed they knew about illicit foreign capital inflating real estate. They first found out over two decades ago, but only confirmed it to the South China Morning Post (SCMP) this week. A whistleblowing, retired auditor first told SCMP journalist Ian Young about the report in 2016. He waited half a decade for a response from the agency, which confirmed the study took place 25 years ago. The situation shares odd circumstances with an intelligence report mentioning foreign capital and real estate, called Sidewinder. Whistleblowers allege both reports, written one year apart, were suppressed for political reasons. 

The Canadian Government Hid A Report On Immigrants Buying Mansions With Poverty-Level Incomes

In 1996, the Canada Revenue Agency (CRA) studied millionaire migrants and homeownership. The tax authority was looking into reports of mansion buyers with poverty-level incomes. Not one or two either, it was a systemic issue.

The secret report was unknown to the public until 2016, when a CRA whistleblower told the SCMP about it. At the time, he alleged the study was suppressed from above. Five years after SCMP filed a freedom of information request, the agency confirmed it does exist.

The volume of wealthy new immigrants declaring refugee amounts of income was impressive. Young’s analysis shows these buyers scooped 90% of high value homes in the Greater Vancouver suburbs of Burnaby and Coquitlam. He notes long-term residents making similar buys declared around 16x the income.

In one example, Young mentions a buyer of a $2.88 million home who declared just C$174 of income. Not C$174,000, but C$174 — about as much as a single-night stay at a Holiday Inn… for some of the world’s most expensive real estate… in 1996.

Greater Vancouver Real Estate Has A Very Long Relationship With Foreign Capital

Greater Vancouver real estate has long been a hub for foreign capital. Around the time of the study, using homes as a vault for foreign capital, was an open secret. The president of Vancouver’s largest developer would boast a year after the study, “No one really got out of Hong Kong… they just shifted their portfolio.” He himself is now Vancouver’s largest developer, for those curious.

Meanwhile, locals and politicians argued if the issue even existed. A study confirming that foreign capital was inflating home prices, may have been a game changer. Marginal buyers can, and did, have a big influence on home prices.

Instead of using this information to improve the lives of residents, it was hidden. Why it was hidden until today is still a mystery, and no one will likely ever discuss the real reason. However, it does bear a strange resemblance to another report on foreign capital and real estate, Operation Sidewinder

A Canadian Intel Report Discussing Foreign Capital and Real Estate Was Also Suppressed

A joint task force of the RCMP and CSIS was created in 1997 to assess China’s influence on Canada. The result was a “Top Secret” report called Sidewinder: Chinese Intelligence Services and Triads Financial Links. The branding budget must have been really tiny at the time. 

There were many allegations, but a big one was criminals exploiting the immigration system. Hiding amongst legitimate immigrants, organized crime infiltrated the same channels to do business. One goal they were accused of, is buying real estate to control local politicians. 

“In itself real estate is not an obvious threat to the security of Canada but it becomes an excellent vehicle to gain access to local politicians and their influence and power,” reads the report.  

The report concludes the joint task force should involve immigration for better screening. Instead, the project was shelved and discredited by CSIS. The RCMP claims the spy-agency “sanitized” the report. One agent even went so far as to file an obstruction complaint.

A report from the Security Intelligence Review Committee (SIRC) in 1999 concluded  Sidewinder was “deeply flawed and unpersuasive.” A longer 22-page report was also released with it, which doesn’t once use the word “China.” Instead, they opt to call it “…a certain foreign country,” but they validate some of Sidewinder’s findings as correct. The details on which parts were correct are scarce, but this part gets air time from Canada’s top spy over a decade later.

“The triads, the tycoons, and ChIS [Chinese Intelligence] have learned the quick way to gain influence is to provide finance to the main political parties. Most of the companies identified in this research have contributed, sometimes several tens of thousands of dollars, to the two traditional parties, that is, the Liberal and Progressive-Conservative Parties.”

— Operation Sidewinder, 1997

Despite the dismissal of the report, a few key allegations would surface again. US Congress wrote a report on organized crime in Canada originating from Asia. A US Congressman also made similar allegations to Sidewinder, but in regards to Panama, when testifying to the House Committee on Banking and Financial Services in 1999. It’s not just the Americans being paranoid though.

In 2010, the head of CSIS candidly told the CBC they were tracking BC public servants. He backtracked a few weeks later, saying it was nothing. It’s apparently a fun game Canada’s top spies play, where they mention threats and then add “jk.”

Let’s assume both reports within a year of each other weren’t the subject of malicious suppression. What we’re seeing here is a period where essential information was suppressed. Information that could have drastically altered Canada’s housing crisis, possibly avoiding it entirely.

Canada learned money laundering and tax evasion influenced home prices 25 years ago. Over that period, politicians and bureaucrats didn’t just hide the findings. They denied it, and often attacked anyone who made similar allegations over that time. All while housing affordability errored into a systemic issue, threatening economic stability. Now all parties acknowledge these issues exist. In fact, addressing them is a key part of every major political party’s election platform this year.

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27 Comments

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  • Scully 2 weeks ago

    Thank you for this article. Finally, the cat is out of the bag, and people, including politicians, are now admitting there is actually a problem with foreign buyers abusing our system and making housing unaffordable (ahem China), instead of gaslighting the public into trying to think otherwise. Acceptance is the first step to recovery.

    • Wayne T Telford 2 weeks ago

      Sorry Scully. Nothing will change. There will be no recovery. Your MP is a trained seal.
      Anybody with a functioning brain knew this was happening.
      Politicians are also landowners and they got rich.
      If you actually day it out loud you will branded as a racist.
      The CBC and CTV will not pay any attention.

  • Whiskey Foxtrot 2 weeks ago

    The gaslighting in this country is unbelievable. Under one government, this issue became problematic. But over 25 years no one could acknowledge it until regional NDP politicians in BC made it their business to find out?

    • Jason Chau 2 weeks ago

      Over 25 years? That was just when it became apparent to people in the streets of Vancouver this was an issue. Try the 80s is when this started.

    • Theresian Selvakumar 2 weeks ago

      Well done NDP

    • Pamela Forward 1 week ago

      The two whistleblowers from Foreign Affairs and RCMP were silenced, fired, denigrated etc. in the early 1990’s when they reported what was going on (Project Sidewinder report). The political and bureaucratic culture then as now was/is “protect our reputations and promotions at all costs over protecting whistleblowers and the rest of us”. This is all well documented here
      https://www.whistleblowingcanada.com/consequences

  • Trader Jim 2 weeks ago

    Try paying 50% of your income to taxes, and compete with someone that pays almost none for the same property.

    The only solution is debt, which is why they keep loading households up with more and more cheap credit.

    • Jake 2 weeks ago

      An important point, since all housing affordability solutions proposed involve giving people more money to compete with these buyers. That’s liquidity before affordability.

  • Jason Chau 2 weeks ago

    The distinction between foreign and domestic capital gets murky when you can pay $20k to become a “student” and avoid the foreign buyer taxes entirely.

    • Ian Brown 2 weeks ago

      Well, I think the bigger issue is foreign capital earned abroad and funneled into Canada without proper vetting avoids taxes in two countries, and banks help you do it if you have a mortgage with them.

      International regulators forced Canada to acknowledge and address this, esp when the US put Canada on a list of unsafe money, but this is obviously isn’t going to be a public discussion.

  • Scott McNa 2 weeks ago

    No surprise, I was involved with the census in the 1990’s, it was people from Hong Kong, the man would generally stay in HK(or at least back and forth) and the kids and mother had no income. You would have a very nice house in Mississauga, with 2 Mercedes in the driveway and zero income. That is why I always discount people living under the poverty line.
    I recall another family, very nice home, 2 20+ year old boys, own a restaurant. Mother and father claimed $20K each, son who worked in the restaurant also $20K, the other son, an Engineer making $65K at the time from a corporation..
    The big scam today is young woman “visiting” Canada for 4 months and leaving with their new child..Worth at least $100K in benefits, child bonus, cheap university, sponsoring citizenship, old age pension, healthcare etc etc

  • Dada 2 weeks ago

    This is happening even today. I think govy want this to continue so that MapleLand economy remains floating. Else China will eat it away in one day.

  • expat 2 weeks ago

    And people think non-resident citizens who want to buy normal houses are part of the problem…

  • Smug Canadians 2 weeks ago

    Interesting that a certain RE blogger who was once in the Fed Government is one of the most
    vocal critics of people claiming there is a foreign east-asian ownership problem. Very interesting.

    • Scully 2 weeks ago

      *wink, nudge* starts with Gar and ends with urner. Yes, it’s completely self-serving. They are his investing clients, after all.

      • c 2 weeks ago

        I sure would like to know how many properties he owns. I also would like to know if he has diversified his housing portfolio into YVR real estate. Just a guess as I did ask but he didn’t answer either question.

      • SH 2 weeks ago

        Indeed. He also loves mass immigration; he denigrates Canadians for taking on too much debt but thinks it’s great when foreigners do it (and push Canadians out of their own cities).

  • Scott McNabb 2 weeks ago

    Much of the foreign money put into real estate is just hiding money. The swiss banks and others have lost some ability to hide the identity of the person holding the account. With real estate you need to look in the country, often even the city, you can hold it in a numbered corporation. What should be done is what was done in the 70’s, any non citizen when buying real estate in Canada pays an extra 15% tax..

  • SH 2 weeks ago

    Guess which party was in power in 1996.

    And, oh I’m sure it’s just a coincidence, 1996 was also the year the federal government abandoned the housing sector, leading to a collapse in housing construction (especially purpose built rentals) and guaranteeing profits to every speculator for the following 25 years.

  • Jay 2 weeks ago

    Crazy thing is these ppl who owns multi million dollars home collect government benefits.

  • Jay 2 weeks ago

    It’s insane these ppl also collect government benefits(CCB, GSTC…) while paying no tax.

  • Charles Willett 2 weeks ago

    Here is a recent book about this very problem, entitled: “Wilful Blindness” by Sam Cooper(2021). The sub-title reads, “HOW A NETWORK OF NARCOS, TYCOONS AND CCP AGENTS INFILTRATED THE WEST”. Around the late 90’s, I remember reading a story in the Vancouver Sun, about how organized crime, from a foreign country, was using BC casinos to launder money. The RCMP spokesperson said it was a huge problem and that the RCMP contingent assigned to this infiltration by foreign organized crime was understaffed in relation to the size of the problem.

  • Screwed 2 weeks ago

    This can’t be resolved and these criminals already leashed these politicians.

    • C 2 weeks ago

      It can be solved. Remember it is us that have the power in a unified voice to demand change. The problem is we all complain to each other but not in a unified way to politicians. We need strong MP’s and we need to have everyone that objects to these gov’t actions, write their MP’s. Just write the same things we write to each other, but include the references we are writing about. Please object, please write, please vote and let them know the reason you vote one way or another. It’s the only way we will accomplish change.

      Oh yes, and “Stephen” P.” for PM or MP, whichever comes first!

  • goodday 2 weeks ago

    Nothing is going to change. There is no hope. All politicians in Canada are corrupt. Leaving for greener pastures is likely the only sensible option.

  • Belinda Stewart 2 weeks ago

    From a home analysis perspective, every hard working Canadian deserves to own one. Decades of being out bidded from owning a home, now it is coming to light why (ref.). A study of what created a housing market based on foreign influence unattainable by hardworking Canadians has recently come to light. Our government, public officials, were bought and paid for to look the other way to wash/clean money coming in from countries that were/are looking to gain a strong hold through Canadian real estate purchases. Housing prices as a result over several decades have become unattainable by hard working Canadians. There is a retribution to be had here by hard working Canadians. Why are we supporting a society built on democracy and free will, when our elected officials are being bought out by outside influences, changing the demography of our society to the point where we no longer matter and our hard work will not be paid off. There is a willful blindness of elected officials making decisions for personal gain that have led to over decades of an erosion of what Canadians initially have come together as a society to build. If elected peoples and governments have been able to allow for the degradation of our Canadian ideology and here we are now, as we recognize the errors of the ways of our predecessors what can we do to make it right? There needs to be a right taken. Every Canadian should know that their hard earned money can buy them a home and security for their children. Canada should not be known as a country where all you need is money to get you in.

  • Jamush 1 week ago

    Canada is a bad place if you actually have to work for a living and ever wanted kids. Land for the global rich. Not for Canadians. So many of my friends plan to leave, it is the affordable option. Me too, if I can somehow, some way.

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