Canada Revenue Agency



Canada Revenue Agency

May 08, 2013 11:15 ET

Harper Government Announces New Measures to Crack Down on International Tax Evasion and Aggressive Tax Avoidance

OTTAWA, ONTARIO--(Marketwired - May 8, 2013) - The Honourable Gail Shea, Minister of National Revenue and Minister for the Atlantic Canada Opportunities Agency and the Honourable Maxime Bernier, Minister of State (Small Business and Tourism), today announced new measures to combat international tax evasion and aggressive tax avoidance, including a $30-million investment by the Harper Government and the creation of a dedicated team to implement measures from Economic Action Plan 2013.

Through these actions, the Canada Revenue Agency (CRA) will have an unprecedented ability to address these serious problems.

"Those who don't pay their taxes by hiding money overseas place an unfair burden on law-abiding, hardworking Canadians," said Minister Shea. "Our Government has long recognized that international tax evasion is a serious issue, and we are dedicated to cracking down on those who attempt to cheat the system."

The Harper Government's efforts to enhance the integrity of the tax system include a $30-million investment over five years for the CRA to target international tax evasion and aggressive tax avoidance. This includes:

  • New resources of $15 million through Economic Action Plan 2013 to establish the necessary systems for the CRA to receive reports from banks and other financial intermediaries on international electronic funds transfers of $10,000 or more; and

  • An additional $15 million in reallocated CRA funds that will be used to bring in new audit and compliance resources dedicated exclusively to international compliance issues and revenue collection identified as a result of measures outlined in Economic Action Plan 2013.

To ensure that these activities move forward quickly, a dedicated team of CRA experts will be created. This new team will be responsible for the implementation of the international tax evasion and aggressive tax avoidance measures announced in Economic Action Plan 2013. It will ensure that the full force of the agency's international compliance and auditing resources are brought to bear on individuals or businesses seeking to hide money or assets offshore.

These actions will increase the CRA's ability to audit, investigate, and pursue cases of international tax evasion and aggressive tax avoidance. Measures announced in Economic Action Plan 2013 include:

  • Launching a new Stop International Tax Evasion Program that will allow the CRA to pay individuals with knowledge of major international tax non-compliance a percentage of federal tax collected as a result of the information provided;

  • Requiring financial institutions and others who currently report information on international electronic funds transfers greater than $10,000 to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to also report those transactions to the CRA;

  • Introducing additional requirements for Canadian taxpayers with foreign income or properties to report more detailed information, and extending the amount of time the CRA has to reassess those who have not properly reported this income.

"Our Government is providing the CRA with further resources to ensure our tax system remains fair for Canadians who work hard and play by the rules," said Minister Bernier. "These new measures will provide additional tools to combat international tax evasion and aggressive tax avoidance, and improve the integrity of the tax system."

The Minister of National Revenue has also directed the CRA to continue to pursue all means available to obtain information that the International Consortium of Investigative Journalists and its members hold on individuals with income or property held offshore, reportedly including 450 Canadians. Written requests from the CRA have already been sent to the International Consortium of Investigative Journalists as well as to the Canadian Broadcasting Corporation, underscoring the public interest in confidential disclosure of the information to the CRA.

FOR BROADCAST USE:

Minister Shea and Minister of State Bernier, announced today a $30-million investment and the creation of a dedicated team to implement measures from Economic Action Plan 2013 that will crack down on international tax evasion and aggressive tax avoidance. "Our Government has long recognized that international tax evasion is a serious issue, and we are dedicated to cracking down on those who attempt to cheat the system," said Minister Shea.

Stay connected (www.cra.gc.ca/socialmedia)

To receive updates when new information is added to our Web site, you can:

- follow the CRA on Twitter - @CanRevAgency;

- subscribe to a CRA electronic mailing list; and

- add our RSS feeds to your feed reader.

You can also visit us on YouTube for tax-related videos.

Backgrounder

Combatting international tax evasion and aggressive tax avoidance

What the Government is doing

International tax evasion and aggressive tax avoidance using offshore accounts are world-wide concerns. The globalization of trade, the easy movement of people and money across borders, and the growth of electronic commerce have made international tax evasion and aggressive tax avoidance a focus for tax administrations around the world.

The Harper Government is combatting international tax evasion and aggressive tax avoidance as part of its work to protect the important resources that Canadians count on to support investments in schools, hospitals, and other vital government services. Hiding income and assets in foreign jurisdictions to avoid taxes is an offence that undermines the integrity and fairness of Canada's tax system.

Whether it is complex corporate schemes, individuals using offshore jurisdictions of concern, "tax havens", or tax shelter schemes that are used to avoid or evade tax, the Harper Government is committed to ensuring that non-compliance is identified and addressed through public information, education, research, international collaboration, audits, and other compliance actions.

The CRA has significantly improved its ability to obtain tax information from other jurisdictions, through revised tax treaties and Tax Information Exchange Agreements (TIEAs) with non-treaty countries. Current, reliable information is key to the CRA's efforts to verify compliance with Canadian laws and reduce opportunities for abuse. Canada has one of the most extensive tax treaty networks in the world, with 90 tax treaties and 16 TIEAs now in force, 3 others signed, and another 11 under active negotiation.

The CRA's resources for audit in international tax planning have increased since 2006, and the CRA has added senior auditors to gather intelligence and constantly identify new ways to prevent and detect tax avoidance arrangements.

We are seeing results

The CRA has a solid record in finding and resolving cases where individuals were participating in or promoting aggressive offshore tax avoidance:

  • Since 2006, the CRA has audited 7,761 cases of offshore aggressive tax planning and identified approximately $4.58 billion in associated unpaid tax.

  • Since 2006, the CRA has completed compliance actions on 340 audit cases of high-net-worth groups (Related Party Individuals) who were using sophisticated business structures and offshore arrangements to avoid taxes, and identified over $195 million in unpaid federal taxes.

  • Through collaboration with an international partner, the CRA identified 106 taxpayers with links to bank accounts in Liechtenstein with potential unreported income. All have since been subject to compliance action. To date, the CRA has reassessed over $22 million in unpaid taxes, interest, and penalties.

Word on the success of the CRA's focused approach is spreading-disclosures received through the CRA's Voluntary Disclosures Program involving offshore accounts or assets have increased from 1,215 in 2006-2007 to over 4,000 in 2011-2012. These disclosures revealed just under $1.5 ($1.497) billion in unreported income and over $400 ($416) million in federal taxes owing.

New measures announced in Economic Action Plan 2013 (EAP 2013) provide the CRA with additional tools to combat international tax evasion and aggressive tax avoidance.

The following new Economic Action Plan 2013 measures will further build the CRA's capacity to combat international tax evasion and aggressive tax avoidance to ensure tax fairness for all Canadians:

  • A new Stop International Tax Evasion Program that will allow the CRA to pay individuals with knowledge of major international tax non-compliance a percentage of federal tax collected as a result of the information provided;

  • Requiring financial institutions and others who currently report information on international electronic funds transfers greater than $10,000 to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to also report those transactions to the CRA;

  • Streamlining the judicial process that provides the CRA authorization to obtain information from third parties such as banks. This measure will facilitate faster access to information on unnamed individuals for the purposes of civil actions; and

  • Introducing additional requirements for Canadian taxpayers with foreign income or properties to report more detailed information, and extending the amount of time the CRA has to reassess those who have not properly reported this income.

Backgrounder

New CRA measures to combat international tax evasion and aggressive tax avoidance

Investing in the integrity of the tax system

The Harper Government is investing $30 million over five years to enhance the Canada Revenue Agency's (CRA) international tax evasion and aggressive tax avoidance-related activities. This includes new resources of $15 million through Economic Action Plan 2013 and $15 million from within the CRA's current resources.

  • The new resources will be used to implement the proposed reporting requirements for International Electronic Funds Transfers announced in Economic Action Plan 2013. Currently, under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, financial intermediaries are required to report international electronic funds transfers of $10,000 or more to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). This includes banks, credit unions, caisses populaires, trust and loan companies, money services businesses, and casinos.

    The new measure proposes that, starting in 2015, these organizations will be required to report the same information to the CRA. The new resources will be used to develop the technology systems necessary to implement the new requirement, and to staff skilled researchers to analyze the information collected.

  • The CRA resources will be used to invest more in compliance and audit activities to make best use of the information and analysis collected through implementation of Economic Action Plan 2013 measures. The Stop International Tax Evasion program will allow the CRA to pay individuals who have knowledge of major international tax non-compliance that leads to federal tax collected; changes to form T1135, Foreign Income Verification Statement, will require Canadians with foreign income or property to provide more information about their holdings; and a streamlined process for obtaining information on third parties in the course of conducting an audit will allow the CRA faster access to information on unnamed individuals for the purposes of civil actions.

    These resources will ensure a long-term commitment to enhancing the CRA's focus on participants in aggressive offshore tax schemes and the movement of income and assets offshore. This commitment will in turn facilitate compliance actions aimed at high-risk/high-priority workload as well as maximize our information and intelligence sharing with our extensive network of treaty partners.

    This investment will produce improved results: a revamped form T1135, Foreign Income Verification Statement will be launched in the coming months, and details of the Stop International Tax Evasion Program will be announced later this year.

Dedicated Implementation Team

The CRA is establishing a dedicated team to provide direction and oversight to accelerate the implementation of the international tax evasion and aggressive tax avoidance measures announced in Economic Action Plan 2013.

The team will be headed by a senior manager with in-depth knowledge of the tax system, who will report directly to the Commissioner of the CRA. It will draw from a variety of disciplines within the CRA, and will support resources across the Agency currently dedicated to international tax evasion and aggressive tax avoidance. The team's mandate will be to work exclusively and full-time to advance all Economic Action Plan 2013 measures, so that these tools and the information they produce are quickly placed in the hands of researchers and auditors.

Contact Information

  • Clarke Olsen
    Director of Communications
    Office of the Minister of National Revenue
    613-995-2960

    Noel Carisse
    Canada Revenue Agency
    Media Relations
    613-952-9184