Michael Ford (post until Oct. 31/19)

Illegal unreported offshore income focus of CRA, global crackdown

While it is not illegal to have an offshore account, it is against the law to fail to declare offshore income or assets to the taxman — and the Canada Revenue Agency (CRA) is already looking into a number of names contained in the ‘Panama Papers’ information leak, Toronto tax attorney David J. Rotfleisch tells Newstalk 1010’s The Night Side.

As CBC News recently reported, the CRA has access to the information contained in the Panama Papers — an entire cache of 11.5 million files.

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

“What in fact they have done is not something that I’ve seen mentioned in any news stories, is they have integrated this searchable database with the one they had previously set up in 2013 for the leak that was called ‘offshore leaks’ and that was a smaller leak of different countries’ tax information, tax haven information. So this is now all integrated into one searchable database,” Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, tells listeners.

While Rotfleisch says it is “absolutely not” illegal to have offshore accounts, companies or trusts, as there are legitimate reasons to set up these types of structures, it is illegal to fail to declare these to the CRA on form T1135.

As a result of the Panama Papers information, he says, the CRA announced that they have the names of some 45 Canadians.

“… [T]hey are going to investigate, and if there are grounds for prosecution, they will prosecute. So they have a head start on everybody else,” he says.

“They are no doubt salivating, but having said that, they are under the gun because this is really an outrageous scandal and Canadians expect everyone to pay their fair share of taxes and they expect CRA to go out and enforce this. So CRA really has to perform on these names,” adds Rotfleisch.

As Rotfleisch tells listeners, unreported offshore income and assets are a major focus of the CRA and its counterparts around the world. The agency, for example, initiated the Offshore Tax Informant Program (OTIP) in recent years — paying 15 per cent of taxes recovered for any tips leading to offshore accounts.

“It’s becoming socially unacceptable for people to improperly evade their taxes and it's subject to a worldwide crackdown now,” he says.

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