Canada on Track to Collect $9.6 Billion in Offshore Tax Evasion Cases

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Peter Menyasz

The Canadian government is revamping its advance income tax rulings process and restricting access to its voluntary disclosures program to better address tax evasion and aggressive tax avoidance, the country’s national revenue minister said.

Improvements to the Canada Revenue Agency’s audit process for multinational and large businesses, together with funding commitments of more than C$1 billion ($740 million) to fight tax evasion, are expected to help recover more than C$13 billion in taxes owing in the fiscal year that ended March 31, 2017, National Revenue Minister Diane Lebouthillier said June 1.

“We are building a stronger and more fair tax system, where those who choose to cheat are no longer able to hide and will face the consequences of their actions,” she said.

Advance Rulings

The tax agency has overhauled its advance income tax rulings process, Lebouthillier said in a May 30 progress report to the House of Commons Finance Committee. The report details the government’s action on the committee’s recommendations in October 2016 in response to the Panama Papers leak of information on tax evasion by major corporations and high-profile individuals.

An advance ruling now requires a meeting with the taxpayer within four weeks of a ruling request to provide an earlier indication of the agency’s views and feedback on the request, the report said. Cases will be closed if the taxpayer doesn’t respond within 30 days to a request for more information, it said.

The CRA will maintain its 90-day service standard for the rulings, but not if they involve complex tax policy issues that must be referred to the agency’s General Anti-Avoidance Rule Committee, Department of Finance, or Department of Justice, it said.

The CRA will also develop guidelines on providing advance income tax rulings on questions of fact, as well as on cases where it refuses to rule on the tax consequences of transactions—either because there is little or no ambiguity or because the agency’s position is well known, it said.

Changes to the Voluntary Disclosures Program will tighten acceptance criteria, with a final version to be made public this fall, the report said. A review of the negotiated audit settlement guidelines will be completed by Oct. 31, 2017, including creation of an Audit File Resolution Committee to address cases with significant dollar amounts or international transactions.

Convictions for Evasion

The tax agency convicted 42 taxpayers of offshore tax evasion in the 2016-17 fiscal year, with federal taxes evaded of C$34 million, generating court fines of C$12 million and jail time totaling 734 months, the government said. The CRA is now auditing more than 820 taxpayers and investigating 20 cases of criminal tax evasion linked to offshore accounts, it said.

The agency is also tracking international electronic funds transfers greater than C$10,000 to and from four jurisdictions and financial institutions of concern, and four additional jurisdictions or institutions will be reviewed each year to identify high-risk taxpayers, it said.

The CRA has conducted risk assessments of 1,300 names to date and, as of April 1, 2017, there were 122 audits of Canadian taxpayers and several ongoing criminal investigations, and 64 potential cases were under review, the report said. Among the assessments, 860 involved non-residents, and in cases where a tax treaty exists, the agency will share some information with the other country, it said.

To contact the reporter on this story: Peter Menyasz in Ottawa at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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