The Government of Canada is taking steps to halt tax evasion and tax avoidance. Most middle-class Canadians pay their fair share of taxes, says CRA, but some wealthy individuals avoid them by unfairly hiding their money in offshore tax havens.
Read: Governments face fallout from offshore accounts report (Also, click here for official Panama Papers landing page)
That’s why the government is investing more than $444 million to enhance the CRA’s ability to detect, audit, and prosecute tax evasion, both at home and abroad, says Minister of National Revenue Diane Lebouthillier.
Since January 2015, the CRA has collected information on all international funds transfers of more than $10,000. Building on this new capability, Budget 2016 provides the agency with the ability to more fully examine potential tax evasion across an entire jurisdiction. The first to be investigated will be the Isle of Man, with additional jurisdictions following.
Audits and Investigations
To combat tax evasion, the CRA will create a special program to stop organizations that create tax schemes for the wealthy. This will result in a twelve-fold increase in the number of tax schemes examined, says CRA. Its team will apply penalties and refer cases for criminal investigation, where appropriate.
- Offshore business ties can boost economies, says expert
- Plenty of legit reasons for offshore accounts
The budget’s federal investment will give the CRA the ability to hire more auditors and specialists. This will increase the number of examinations focused on high-risk taxpayers – from 600 per year to 3,000 per year – and will bring in $432 million in new tax revenue.
In addition, new government funding will help the CRA bring in 100 additional auditors to investigate high-risk multinational corporations and collect an additional $500 million in revenue over five years.
Penalties and Prosecution
The CRA will embed legal counsel within investigation teams, so that cases can be quickly brought to court. The agency will use the latest investigative tools, paired with larger investigative teams, to detect more cases of tax evasion that result in the appropriate charges, fines, and penalties.
Minister Lebouthillier also announced the CRA will:
- bolster international collaboration to fight tax evasion,
- create an independent advisory committee on offshore tax evasion and aggressive tax planning; and
- begin work to estimate the tax gap, so that Canadians and Parliamentarians have confidence in the fairness of the tax system.
- New funding to crack down on tax evasion and fight tax avoidance is expected to return $2.6 billion in revenue to the Crown over five years.
- Electronic funds transfers to the Isle of Man totaled $860M in a 12-month period, and the CRA has assessed the risk of all 3,000 funds transfers involving approximately 800 taxpayers. The CRA will expand its analysis to other jurisdictions as well as financial institutions of concern this year, with a second project set to begin in May 2016.
- This year, through the voluntary disclosures program, the CRA is on track to identify $1 billion in income that would otherwise have been hidden. That is an increase of almost 400% over the last six years.