Michael Ford (post until Oct. 31/19)
Tax

CRA's swift action shows priority of Panama Papers files

The Canada Revenue Agency’s (CRA) rapid and public response to the recent ‘Panama Papers’ information leak shows just how much importance the taxman is placing on this file — and on recovering unreported offshore income in general, Toronto tax attorney David J. Rotfleisch tells AdvocateDaily.com.

The International Consortium of Investigative Journalists (ICIJ) — which revealed the information — recently made a searchable database available that allows the public to look up names and companies contained in the Panama Papers, detailing more than 214,000 offshore companies, trusts and foundations administered by Panama-based law firm, Mossack Fonseca.

Shortly after the leak of the Panama Papers was reported, the Toronto Star noted that Canada's Minister of National Revenue 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 Mossack Fonseca. As CBC News reported, the CRA now has access to the entire cache of 11.5 million files contained in the leak. 

Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, explains that although the CRA has allocated resources to fight unreported offshore income for several years now, the fact that the agency went to court so quickly shows that it is treating this as a priority file.

“It has responded publicly by way of the minister announcing that CRA would investigate and prosecute where appropriate. They also applied to court to have RBC release the names of clients for whom it had worked with Mossack Fonseca to set up offshore corporations,” he says.

“There was no public announcement following the offshore leak two years ago, so it is apparent that this is much higher profile with both the public and CRA,” adds Rotfleisch.

The CRA’s investigations into the files are likely still at the preliminary stage, with the agency needing to determine if there are grounds to prosecute. It is very unlikely that any actual prosecutions have taken place, says Rotfleisch.

However, he adds, if the CRA does choose to prosecute anyone, this process will likely remain private unless the agency decides to put out news release setting out that they have charged certain taxpayers as a result of the Panama Papers investigation. 

“CRA has not done press announcements of prosecutions commenced in the past. They do press releases when they secure a conviction,” he explains.

At the moment, Rotfleisch says the CRA isn’t under any active pressure to produce results in the Panama Papers cases, given that it is not a topic in the House of Commons, or in ongoing media stories. However, he says, this may change.

“As stories appear in other jurisdictions it may create attention again in Canada and result in pressure. Presumably, at some point the opposition will ask questions in the House and the minister will have to reply.”

For those named in the information leak, Rotfleisch warns that if the CRA has started to investigate any given taxpayer, then it would no longer be possible to file a voluntary disclosure.

However, he adds, “It's possible that a given name is sitting in a database and CRA has not yet opened a file. That taxpayer can still qualify for the voluntary disclosure. But it's clear that the opportunity is rapidly disappearing.”

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