‘High-risk’ taxpayers, offshore tax havens part of Ottawa crackdown
The announcement comes after the Star has published a week of daily revelations from the Panama Papers detailing the extensive - and complex - moves by the wealthy to shelter wealth offshore.

thestar.com
April 11, 2016
By Bruce Campion-Smith

Ottawa is stepping up its fight against offshore tax dodgers by putting “high-risk” taxpayers in the crosshairs, cracking down on the promotion of tax shelters and launching targeted probes of foreign tax havens, the Star has learned.

National Revenue Minister Diane Lebouthillier will unveil the new initiatives at a news conference Monday morning.

The announcement comes after the Star has published a week of daily revelations from the Panama Papers detailing the extensive - and complex - moves by the wealthy to shelter wealth offshore.

The 11.5 million documents from Panamanian law firm Mossack Fonseca comprise the largest journalistic leak in history, which has been analyzed and corroborated by journalists at over 100 news organizations around the world, including the Star. The ensuing reports have implicated a dozen world leaders in offshore dealings, including Iceland’s Prime Minister Sigmunder Gunnlaugsson, who resigned last week, and the U.K.’s David Cameron, who admitted to profiting from offshore investments.

Often such money is held in legitimate investments abroad. But other times, the wealth has been deliberately moved offshore to avoid taxes.

Echoing leaders on four continents who have called for a crackdown, Prime Minister Justin Trudeau said last week that the details in the Panama Papers underscore the need to act.

“There is an increasing desire for transparency and accountability and making sure that everyone is participating to a fair degree,” Trudeau said.

Monday, Lebouthillier will detail the Canada Revenue Agency’s plan to step up its efforts to uncover - and tax - millions of dollars Canadians have purposely stashed in offshore accounts to keep hidden from tax collectors.

Indeed, the government says that while “most” middle class Canadians pay their fair share of taxes, “some wealthy individuals avoid taxes by hiding their money in offshore tax havens.

“This is not fair and it needs to change. These wealthy Canadians should not be able to buy their way out of paying the income tax that they owe,” reads the news release for Monday’s announcement, which was obtained by the Star.

Her announcement will highlight how new funding of $444 million earmarked in the Liberals’ March budget to go after tax evaders will actually get spent.

The new initiatives will focus on three areas - detection, investigations and prosecution, according to the document obtained by the Star.

For example, since January 2015 the CRA has been collecting information on all international funds transfers worth more than $10,000. The budget funding will give the CRA additional resources to “fully examine potential tax evasion across an entire jurisdiction,” according to the news release.

The Isle of Man will be the first jurisdiction to be targeted, the release says. CBC News/Radio Canada reported in March that the CRA had offered amnesty to Canadians who had made investments in shell companies on the Isle of Man.

The CRA also plans to deter tax evasion and avoidance with a new program devoted to curbing the organizations that create and promote “these tax schemes for the wealthy,” according to the news release. This team will levy penalties and refer cases for criminal investigation, the release said.

The government also intends to go after “high-risk” taxpayers by hiring auditors and specialists. The CRA says the extra staff will allow it to boost the number of examinations to 3,000 a year, up from 600 now. And it expects to rake in an extra $432 million in new tax revenue as a result of the extra scrutiny.

As well, the funding will mean the hiring of 100 more auditors to investigate what it brands “high-risk” multinational corporations. This should bring in an additional $500 million in tax revenue over the next five years, the department says.

Finally, the CRA will add lawyers to its investigation teams to help speed cases to court.

The government says that the initiatives to be outlined Monday are not a direct response to the Panama Papers. Instead, they say the revelations from the documents simply confirm long-standing concerns over tax evasion that moved the party to make it an issue during the election.

“The unprecedented investment made in the CRA’s activities through Budget 2016 will fundamentally change our ability to identify and pursue both domestic and offshore tax evasion and avoidance,” Lebouthillier said in a statement prepared for the announcement.

“Those who hide income and assets offshore or try to evade or avoid paying the tax they owe will be identified and will face consequences,” the minister said.

The government has already signalled other moves to detect and combat tax evasion, such as boosting international collaboration to fight tax evasion.

As well, Lebouthillier has said the department will finally attempt to measure the tax gap - the difference between what the government collects in taxes and an estimate of what it should be getting.