CRA has launched the Electronic Funds Transfer (EFT) initiative, introduced in the 2013 Budget as one of several new measures to crack down on international tax evasion and aggressive tax avoidance.
Effective January 1, 2015, certain financial intermediaries, including banks, have to report to the CRA incoming and outgoing international EFTs of $10,000 or more. These reports will allow the CRA to better identify higher risk taxpayers and files and, in turn, more effectively identify taxpayers who participate in international aggressive tax avoidance and attempt to conceal income and assets offshore.
Our Government’s efforts to combat international tax evasion and aggressive tax avoidance are already paying dividends. In fact, the Auditor General of Canada confirmed in his two recent reports on Offshore Banking and Aggressive Tax Planning that the CRA is getting the job done. Taxpayers are taking notice too. Since 2008, the CRA has seen a dramatic increase in the use of the Voluntary Disclosure Program (VDP).
VDP disclosures related to offshore issues reached a record level in 2013-2014, with an increase of almost 42% from the previous year’s figures, helping the CRA to identify more than $300 million in unreported income. Consequences can be serious for those that do not come forward. From April 2006 to March 31, 2014, the CRA has convicted 62 taxpayers for tax evasion, involving $20 million in evaded federal taxes, court fines of approximately $12 million, and 701 months of jail time.
- The new reporting requirements are the same as those for reports currently provided to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Financial intermediaries will submit one report to both FINTRAC and the CRA at the same time. EFTs must be filed no later than five working days after the day the transfer occurred.
- Information that must be reported includes the transmission of instructions for a transfer of funds through any electronic, magnetic or optical device, telephone instrument or computer, made at the request of a client.
- Information collected under this measure will be safeguarded by the CRA. The data will only be used for the purposes for which it is collected, will be subject to strict security protocols, and held in a segregated database.
- Through this initiative, financial intermediaries will play an important role in helping the CRA to detect offshore transactions that are potentially associated with tax evasion and aggressive tax avoidance.
- The following financial intermediaries will be submitting EFT reports:
- Financial entities (banks; credits unions; caisses populaires; financial service cooperatives; trust and loan companies; and crown corporations that accept deposits)
- Money service businesses (MSBs); and