Is Canada Good as an Asset Protection Haven?

Last week Kitco Metals, Inc a reputable precious metal dealer from Canada was raided by authorities in Quebec. More than 175 Revenue Quebec Agents (equivalent to the US IRS) conducted raids related to Kitco on homes, offices, accountancy firms and bankruptcy trustees in the Montreal area, and a court-appointed receiver is now controlling the company. Canada has a respectable image internationally with a stable banking system and a currency that is doing well primarily due to Canada’s huge wealth of gold and other natural resources. You may think that Canada could be a great safe haven for our declining dollar. However, thinking of Canada as an investment alternative to the instability in the United States received a big surprise last week. Here are some reasons the Canadian dollar should not be considered as a hedge currency for the US dollar:

1. The Canadian economy is very tied to the US economy,
2. The Canadian Government is intent on devaluing the Canadian dollar alongside the US,
3. The Bank of Canada has virtually no gold for backing the Canadian dollar,
4. All that does back the Canadian dollar is the US dollar and other fiat currencies, and
5. The Canadian dollar is not used globally

The raid against Kitco seems to be focused on the sales tax evasion. When you trade in gold bullion the transaction is exempt from sales taxes, but not gold scraps. It appears that Kitco was buying scrap gold, paying the sales tax to the sellers (local jewelery firms or small gold dealers) then legitimately reclaiming the sales tax paid. Since Kitco was selling bullion, they were not obliged to charge sales tax. Therefore they would have been receiving large tax rebates on a regular basis – something governments obviously hate! In Europe this is called “missing trader fraud” or “carousel fraud”. Keep in mind that Kitco has not been formally charged with anything.

This raid to an internationally recognized firm is a wake up call, since gold traders are not popular people with the governments. The Canadian taxman has learned from the US about high profile, publicity seeking cases where you accuse first, destroy somebody’s business, then later look at the facts. The lesson from this event is to proper planning for your asset protection. Many people think that the best places to store gold is the United States, UK and Canada, but that is not necessarily true. If you have gold to be stored or thinking on trading in gold considered Switzerland. Switzerland is the center of the world gold trade, a bastion of stability, and it is just unthinkable that the Swiss government would do something like the Kitco raid. Another place that is overlooked is Singapore. It isn’t yet able to compete with Switzerland on pricing and volume, but several storage facilities are now offering precious metals storage in the duty free zone at Changi Airport. Hong Kong is another option for your consideration. The bottom-line is proper financial planning.