Redress Risk Management (post until May 31/19)

Data leak highlights risk of unreported offshore assets

While the recent release of millions of documents detailing the offshore assets of a number of prominent international figures may be unprecedented in terms of its scale, this is not the first time this type of information has been leaked, Toronto tax attorney David J. Rotfleisch tells CTV News Network.

As the Associated Press reports, the Washington-based International Consortium of Investigative Journalists has brought to light some 11.5 million records, detailing the offshore financial dealings of wealthy, famous and powerful individuals around the world.

But as Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, tells CTV News Network, public release of this type of information has not been unusual in recent years.

“You may remember about a year ago, there was an HSBC leak, also co-ordinated through the International Consortium of Investigative Journalists and there were Canadians involved with that. And three years ago, in 2013, there was a leak, also of trust documents coming out of, I think it was Liechtenstein, again, involving a massive number of documents internationally, with Canadians affected, including, you may recall, Canadian senators,” he says.

When it comes to how the secret world of offshore accounts operates, Rotfleisch explains that many of the offshore accounts Canadians are reading about are being used for improper purposes, facilitated by the largest organizations in the world.

“The purpose really is to hide assets from whoever. At a more local level, it's to avoid Canadian taxes, that’s why a lot of non-high profile Canadians will set up this type of structure, and it involves using offshore corporations. It may involve using offshore trusts as well, and certainly offshore bank accounts and offshore investment accounts.”

While there is nothing wrong with having offshore accounts in general, Rotfleisch explains that certain activities within these structures — obtaining bribes or kickbacks for example — are illegal. And for Canadians, he warns, failing to declare offshore assets and income is also illegal.

“There’s something very wrong — it's tax evasion — in not declaring it to the Canada Revenue Agency.”

Canadians who have undeclared offshore assets and undeclared offshore income face tax evasion charges from CRA, Rotfleisch tells CTV News Network.

Ultimately, he says there is no global police force to handle international incidences of tax evasion.

“There is a treaty that Canada will be signing onto in 2018, I believe, with the OECD, requiring a higher level of reporting between member governments. But it’s up to each country to police its own officials. So, the CRA will be going after Canadians, the IRS will be going after Americans, the various tax authorities will be going after tax evaders,” Rotfleisch explains.

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