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CRA enforcement efforts set sights on domestic, offshore accounts

News that recent enforcement initiatives significantly surpassed the Canada Revenue Agency's (CRA) expectations in 2014-2015 is just the latest evidence that the taxman is being more aggressive with its collections for both domestic and offshore accounts, Toronto tax attorney David J. Rotfleisch tells

As the Globe and Mail reports, although the CRA initially estimated additional revenue of $550 million a year by 2014-15 from enforcement measures announced in the 2013 budget, it says the final net impact was actually $1.57 billion that year.

Although the article says the CRA did not provide details on how it beat its goal, Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, says the agency is taking a more forceful approach. 

“CRA collections officers have the ability to seize wages and assets including bank accounts and to lien houses, all without a court order.”

Also, he notes that the CRA’s crackdown on unreported offshore income has been a major priority for several years.

“They introduced the Offshore Tax Informant Program (OTIP) recently to pay tipsters who reveal unreported offshore income or assets.” The program, Rotfleisch explains, pays a fee of up to 15 per cent of tax collected to whistleblowers who reveal offshore unreported assets or income.

Other measures introduced in the 2013 budget included amending federal tax laws so that financial institutions must report international electronic fund transfers of $10,000 or more.

A new rule was also created, requiring individuals or companies in Canada to file a more detailed Foreign Income Verification Statement if they own foreign income-earning property that costs more than $100,000, says the Globe.

Changes announced in 2013 also required individuals to disclose the name of an institution holding foreign funds, as well as the specific country where the property is, and the amount of foreign income generated.

Looking ahead, the Globe says international attention is now being paid to the offshore tax haven issue, in light of the recent ‘Panama Papers’ information leak and a focus on offshore tax havens in general.

As the article notes, the G20 and Organization for Economic Co-operation and Development countries have increased efforts to share data on taxes and financial transactions, with a view to preventing the erosion of the tax base that funds government programs.

In Canada, the 2016 budget announced plans to invest $444.4 million over five years for the CRA to ‘enhance its efforts to crack down on tax evasion and combat tax avoidance’ and expects a revenue impact of $2.6 billion over five years from these measures.

As part of the International Consortium of Journalists involved in reporting on the Panama Papers, the Toronto Star recently reported that Canada's Minister of National Revenue has filed a federal court application seeking an order under the Income Tax Act, compelling the Royal Bank of Canada (RBC) to reveal the identities of clients with “relationships or connections” to the Panama-based law firm at the centre of the investigation. According to a Reuters report, RBC has agreed to hand over the names.

The RCMP is also trying to obtain the documents, the Star reports.

Rotfleisch says the CRA's federal court application in this case was inevitable and foreseen.

"The response by RBC does not surprise me either since the current law allows the CRA to seek third party records, as was demonstrated a few years ago in the eBay case," he explains.

Broadly, as Rotfleisch notes, the passport information of 350 Canadians involved has been released, so the CRA does not likely need copies of the Panama Papers to go after individuals. 

“Even if the detailed papers are not released, the CRA can audit and prosecute for tax evasion,” he says.

“The CRA will certainly bring tax evasion charges since this leak is so high profile. Canadians involved have the ability to avoid prosecution by submitting a voluntary disclosure prior to the CRA commencing their investigation,” he adds.

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