What the Government is doing
International tax evasion and aggressive tax avoidance using offshore accounts are world-wide concerns. The globalization of trade, the easy movement of people and money across borders, and the growth of electronic commerce have made international tax evasion and aggressive tax avoidance a focus for tax administrations around the world.
The Harper Government is combatting international tax evasion and aggressive tax avoidance as part of its work to protect the important resources that Canadians count on to support investments in schools, hospitals, and other vital government services. Hiding income and assets in foreign jurisdictions to avoid taxes is an offence that undermines the integrity and fairness of Canada’s tax system.
Whether it is complex corporate schemes, individuals using offshore jurisdictions of concern, “tax havens”, or tax shelter schemes that are used to avoid or evade tax, the Harper Government is committed to ensuring that non-compliance is identified and addressed through public information, education, research, international collaboration, audits, and other compliance actions.
The CRA has significantly improved its ability to obtain tax information from other jurisdictions, through revised tax treaties and Tax Information Exchange Agreements (TIEAs) with non-treaty countries. Current, reliable information is key to the CRA’s efforts to verify compliance with Canadian laws and reduce opportunities for abuse. Canada has one of the most extensive tax treaty networks in the world, with 90 tax treaties and 16 TIEAs now in force, 3 others signed, and another 11 under active negotiation.
The CRA’s resources for audit in international tax planning have increased since 2006, and the CRA has added senior auditors to gather intelligence and constantly identify new ways to prevent and detect tax avoidance arrangements.
We are seeing results
- The CRA has a solid record in finding and resolving cases where individuals were participating in or promoting aggressive offshore tax avoidance:
- Since 2006, the CRA has audited 7,761 cases of offshore aggressive tax planning and identified approximately $4.58 billion in associated unpaid tax.
- Since 2006, the CRA has completed compliance actions on 340 audit cases of high‑net‑worth groups (Related Party Individuals) who were using sophisticated business structures and offshore arrangements to avoid taxes, and identified over $195 million in unpaid federal taxes.
Through collaboration with an international partner, the CRA identified 106 taxpayers with links to bank accounts in Liechtenstein with potential unreported income. All have since been subject to compliance action. To date, the CRA has reassessed over $22 million in unpaid taxes, interest, and penalties.
Word on the success of the CRA’s focused approach is spreading—disclosures received through the CRA’s Voluntary Disclosures Program involving offshore accounts or assets have increased from 1,215 in 2006-2007 to over 4,000 in 2011-2012. These disclosures revealed just under $1.5 ($1.497) billion in unreported income and over $400 ($416) million in federal taxes owing.
New measures announced in Economic Action Plan 2013 (EAP 2013) provide the CRA with additional tools to combat international tax evasion and aggressive tax avoidance.
The following new Economic Action Plan 2013 measures will further build the CRA’s capacity to combat international tax evasion and aggressive tax avoidance to ensure tax fairness for all Canadians:
- A new Stop International Tax Evasion Program that will allow the CRA to pay individuals with knowledge of major international tax non-compliance a percentage of federal tax collected as a result of the information provided;
- Requiring financial institutions and others who currently report information on international electronic funds transfers greater than $10,000 to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to also report those transactions to the CRA;
- Streamlining the judicial process that provides the CRA authorization to obtain information from third parties such as banks. This measure will facilitate faster access to information on unnamed individuals for the purposes of civil actions; and
- Introducing additional requirements for Canadian taxpayers with foreign income or properties to report more detailed information, and extending the amount of time the CRA has to reassess those who have not properly reported this income.
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