Playing a leadership role: what Canada is doing to promote international cooperation on tax evasion

Backgrounder

The Government of Canada continues to play a leadership role in the global network of tax administrations that work together to fight offshore tax evasion and tax avoidance. Information sharing and international cooperation are paramount to fighting international tax evasion and aggressive tax avoidance, serving as a deterrent and a way to identify non-compliance.

Canada has one of the most extensive tax treaty networks in the world, with 92 tax treaties and 22 Tax Information Exchange Agreements currently in force. Canada has also recently ratified the multilateral Convention on Mutual Administrative Assistance in Tax Matters, which further expands our international information sharing network.

Tracking International Funds Transfers

Since January 1, 2015, financial intermediaries—including banks, credit unions, money transfer businesses, and casinos—must report to the Canada Revenue Agency (CRA) incoming and outgoing international electronic funds transfers of $10,000 or more.

As the world's attention is focused on developments following the disclosure of the Panama Papers, the Minister of National Revenue announced today that the CRA is accelerating its compliance actions on offshore activities of some Canadians, based on information it has collected from international electronic funds transfers, the Offshore Tax Informant Program, and data exchanged via its network of more than 92 treaties.

Beginning this month the CRA will be contacting approximately 350 individual taxpayers and 400 businesses that have had transactions involving the Isle of Man. More than 60 audits related to these taxpayers are already underway.

Further, in May 2016, the CRA will expand its analysis to other jurisdictions of concern as well as financial institutions of concern.

This work is in addition to the more than 600 other audits related to offshore compliance already in progress, and to the work currently underway in relation to the Mossack Fonseca data leak. The CRA has made requests to the International Consortium of Investigative Journalists as well as Canadian media sources for the full Panama Papers data set, and is also working with tax treaty partners to obtain all relevant information on this file.

In addition, this week, in Paris, CRA representatives will be attending an international meeting of the Organization for Economic Cooperation and Development's (OECD) Joint International Tax Shelter Information & Collaboration (JITSIC) Network, a network of 27 countries to exchange on bi-lateral and multi-lateral basis. During the meeting, discussions will be held with JITSIC partners on next steps in obtaining and sharing information related to Mossack Fonseca.

Common Reporting

The Government is committed to implementing automatic exchange of financial account information under the common reporting standard (CRS) developed by the OECD starting on July 1, 2017. The CRS will require financial institutions to identify accounts held by non-residents and report certain information relating to these accounts to domestic tax authorities. Tax authorities will then exchange with each other information relating to financial accounts in their jurisdictions held by residents of the other jurisdiction. To date, over 90 jurisdictions have committed to implement this new standard.

At the November 2015 G-20 Leaders' Summit, Canada and the other G-20 members endorsed the package of recommendations developed under the G-20 and the OECD Base Erosion Profit Shifting (BEPS) project.

Budget 2016 proposes new legislation to strengthen international reporting obligations for large multi-national enterprises (MNEs). As a result of the proposed legislation, the CRA will be moving forward on several action items:

• The CRA will sign a multilateral agreement to share information with treaty partners on key Base Erosion and Profit Shifting related reports for country by country reporting, at an OECD meeting in Beijing in May.
• The country by country reports will provide high-level overviews of the global operations of large MNEs to enhance transparency and assist tax administrations in performing more effective risk assessments;
• First exchanges between jurisdictions of country by country reports are expected to occur by June 2018;
• Before any exchange with another jurisdiction, the CRA will formalize an exchange arrangement with the other jurisdiction and will ensure that it has appropriate safeguards in place to protect the confidentiality of the reports.

As all these sources of intelligence and ongoing audits bear fruit, the Agency will be initiating criminal investigations where warranted. Where appropriate, referrals to the Public Prosecution Services of Canada for possible criminal prosecution will also be made.

Hon. Diane Lebouthillier Canada Revenue Agency Economics and Industry