Accounting for Law

CRA likely to seek bank client details after new offshore leak

With newly leaked documents showing a link between several of Canada’s banks and an island tax haven, there is a strong likelihood that the Canada Revenue Agency (CRA) will again head to court to ask for the release of client information, Toronto tax litigation lawyer David J. Rotfleisch tells

As the Toronto Star reports, a recent leak to the International Consortium of Investigative Journalists (ICIJ) and German newspaper Süddeutsche Zeitung, shared with the Star and CBC, reportedly shows that RBC, CIBC and Scotiabank have registered nearly 2,000 offshore companies and private foundations in the Caribbean tax haven of the Bahamas.

The leaked Bahamian registry was published online in a searchable database containing 1.3 million files that include the names of international politicians and business leaders, the Star reports.

In the database of 175,500 corporate registrations, RBC registered 847 companies, CIBC registered 632 and Scotiabank registered 481 in the Bahamas between 1990 and this past May, says the article.

As the Star notes, there are legitimate reasons for setting up corporations offshore in traditional tax havens and there is no evidence of any illegal activity in the corporate registration records.

As Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, tells, this is the second leak this year from the ICIJ. Although this is much smaller than the Panama Papers leak, Rotfleisch says, “it provides more evidence of Canadian participation, and bank involvement, in the world of offshore tax havens.

“The ICIJ has added Bahamian corporate records to its searchable database. As a result, three Canadian banks have been identified as having registered nearly 2,000 offshore companies and private foundations in the Bahamas. Several months ago, CRA went to the Federal Court of Canada and obtained a court order for seven years' worth of transaction information from the Royal Bank of Canada and Citibank, N.A., related to accounts in the name of Cayman National Bank Ltd. The court application was eventually not opposed by the banks. RBC has been named as one of the three Canadian banks in the latest link.

“It is almost certain that CRA will again seek a court order asking for the release of details about the banks' clients,” adds Rotfleisch.

Although the CRA is taking some action to fight international tax evasion, Rotfleisch says another recent Toronto Star story suggests the taxman is not cracking down on international files to the same extent as other countries, and has been including prosecutions with only marginal global connections in its international prosecution statistics. 

However, he adds, “The Offshore Informant Program (OTIP) program is starting to show results, with 180 taxpayers under audit as a result of tips.”

As a result, Rotfleisch explains, “For Canadians who have bank accounts in offshore tax havens and have unreported income or undeclared offshore assets, the CRA Voluntary Disclosures Program remains a safe haven for them. If they approach CRA before a tax audit or investigation is commenced there will be no tax prosecution for tax evasion and no civil tax penalties.”

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