Over the course of several months I have taken the opportunity this blog provides to explain some of the Canadian Revenue Agency (CRA) activities being undertaken to reduce Canadian tax evasion and ensure that everybody is paying their fair share to the Government. One of the key areas of focus for the CRA is in the area of offshore tax havens, and there is good reason for this activity.
What is driving the collection push?
If I told you that since 2010 the CRA has been able to collect over $13.4 million in fines for offshore tax evasion would you be surprised? Perhaps that sounds like a lot? Or not enough? Well, a recent article published in the Toronto Star did a great job of highlighting the context of this number; as it turns out $13.4 million is a small number relative to the $35.7 million in taxes that individuals and businesses were evading – a difference of over $20 million between the fines and the amount not collected, that’s a revenue shortfall which can have a huge impact. Further, when compared to other countries who are also focusing on reducing the number of offshore tax havens being used, we see an even bigger issue: Since 2006 Australia has collected more than $600 million from those using offshore tax havens, and the U.K. has recovered over $3.5 billion since 2010!
Now, in fairness, the CRA is claiming that they are seeing a reduction in domestic convictions of tax evasion, while the international convictions have remained steady since 2010 – the CRA claims to be focusing on “the most egregious offenders”, those who stash millions offshore.
The Liberal government has made a significant commitment (on paper at least) to continue to pursue those Canadians who are doing their best to evade taxes, and based on the numbers that makes perfect sense – if the government invests in collections they are most certainly going to find them. There is simply too much money not being collected for the government to turn away from this opportunity.
As well as the opportunity to pursue even offshore tax avoidance, some of the laws we have in Canada are plainly outdated and need to get us up to speed with the rest of the world. As an example, and as stated in The Star’s article, “the requirement for banks to report all international transfers of $10,000 or more, introduced in January 2015, has existed in the U.S. since 1970”. Imagine that – it took Canada 45 years to catch up to the U.S. on what seems like a very useful law to track big amounts of money leaving out country.
What does this mean to you?
Canada is playing catch up and the pace is likely to increase before it slows down. Laws are getting updated, strategies are beginning to hit the market, and the push from the government is here to stay. This means that if you have clients who are taking curious or questionable steps with regards to their taxes they are at risk of getting caught and punished by the CRA.
As professionals part of our responsibility is to advise and support our clients, we need to protect them as best we can to keep them in business and on the right side of the tax man. Let’s connect and talk about this, there’s much more information to share so that you can be properly equipped to support your clients.