Cracking down on offshore tax evasion and aggressive tax avoidance
Offshore tax evasion and aggressive tax avoidance impacts all Canadians
Canada has one of the highest voluntary compliance rates in the world – most Canadians file and pay their taxes on time. But, a small minority still choose to not pay what they owe. This is not fair and has to stop. Tax schemes rob Canadians of important resources and deprive all levels of government of tax revenues that provide essential services to all Canadians.
Canadian taxpayers should not be burdened with paying for those who do not pay their part. In order to ensure a tax system that is responsive and fair to all taxpayers, the Government of Canada takes continuous action to crack down on offshore tax evasion and aggressive tax avoidance.
Using intelligence gathered through a variety of tools at its disposal, and using experienced audit and investigations teams as well as through information sharing and collaboration with international partners, the Canada Revenue Agency (CRA) has a robust system in place to tackle tax evasion and aggressive tax avoidance on many fronts, both domestically and internationally.
There are also ways you can contribute and do your part in the effort to combat offshore non-compliance.
What the CRA is doing to crack down on offshore tax evasion and aggressive tax avoidance:
- Reviewing high-value money transfers as they cross borders to and from Canada (Electronic Funds Transfers (EFTs) over $10,000) and studying specific offshore locations and certain financial institutions
Since January 2015, the Government of Canada has required financial institutions to report international EFTs of $10,000 or more to the CRA, to help identify taxpayers who may be participating in aggressive tax avoidance or who may be attempting to conceal income and assets offshore. With funding announced in Budget 2016, the CRA now has an increased ability to more fully examine potential tax avoidance across jurisdictions of concern, in order to identify those taxpayers who may not be paying their fair share of taxes by hiding their assets.
Get a quick view on results.
- Collaborating and sharing information with international partners
Canada is working with its international partners at the Organisation for Economic Co-Operation and Development (OECD) and the OECD’s Forum on Tax Administration (FTA), to promote international tax standards, reduce tax barriers, create better opportunities for Canadian businesses, and increase transparency around global tax issues. As a member of the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) network, with over 35 other countries, Canada is working with counterparts to coordinate strategies that will ensure that individuals and multinationals are not hiding money and assets offshore and that everyone pays their part. In January 2017, Government of Canada representatives participated in the largest ever simultaneous exchange of information at a JITSIC meeting to share finds related to the Panama Papers leak.
- Identifying promoters of aggressive tax schemes
The CRA is identifying and unravelling new schemes by identifying and taking action on the promoters of these schemes. Those who choose to promote these schemes can face serious consequences, including paying penalties and potentially, criminal prosecution, fines and jail time.
- Identifying international non-compliance and abuses through the exchange of information within a large treaty network
Canada has one of the largest treaty networks in the world composed of 93 tax treaties, 22 tax information exchange agreements (TIEAs), and the multilateral Convention on Mutual Administrative Assistance in Tax Matters in force. These treaties and agreements promote greater international cooperation through the exchange of information, thereby allowing the CRA and tax agencies around the world to identify non-compliance practices and take action to stop them. These tools help tax administrations uncover offshore tax evasion and aggressive tax avoidance.
- Offshore Compliance Advisory Committee (OCAC)
The OCAC is an independent advisory committee of experts that was created to advise the Minister of National Revenue and the CRA on strategies to combat offshore tax evasion and aggressive tax avoidance. On December 5, 2016, the Minister of National Revenue received the OCAC’s report on the Voluntary Disclosures Program (VDP), which contains recommendations to enhance the VDP and improve it for the benefit of Canadians. The insight provided by OCAC will help inform the CRA’s next steps to ensure that the VDP is delivered in a fair and effective manner.
- Combatting avoidance by big multinational companies through actions set in the Base Erosion and Profit Shifting (BEPS) Action Plan
The plan aims to address international aggressive tax avoidance strategies used by some multinational enterprises to inappropriately minimize their tax obligations, including schemes that artificially shift profits offshore. The Minister of National Revenue signed, in May 2016, the Multilateral Competent Authority Agreement (MCAA) on country-by-country reporting. Country-by-country reporting will involve stronger international reporting obligations for large multinational enterprises. This will improve Canada and its international treaty partners’ ability to ensure that the global operations of these enterprises are more transparent and that they pay appropriate taxes in the countries where their profits are generated. These reports will be shared among treaty partners beginning in June 2018.
- Inviting Canadians to voluntarily correct their tax affairs through the Voluntary Disclosures Program (VDP). The VDP gives taxpayers a chance to change a tax return previously filed or to file a return they should have filed.
- Encouraging Canadians to come forward if they have information pertaining to cases of offshore aggressive tax avoidance through the Offshore Tax Informant Program (OTIP).
What can you do?
You can do your part to help us tackle offshore tax evasion and aggressive tax avoidance.
- Be aware of your reporting obligations
Taxpayers must report certain assets with a total cost of more than $100,000 on Form T1135, Foreign Income Verification Statement, by the filing due date of their income tax return. They must also make sure that they have properly reported any foreign income and gains on their income tax return.
- Correct your tax affairs through the Voluntary Disclosures Program (VDP)
Do you want to correct your tax affairs? Find out how.
- Submit information to the Offshore Tax Informant Program (OTIP)
Are you aware of a situation or do you have information regarding international aggressive tax avoidance? Learn more.
We are cracking down on offshore tax evasion and aggressive tax avoidance (JPG)
We are cracking down on offshore tax evasion and aggressive tax avoidance. Regarding offshore tax havens, there are over 820 audits and over 20 criminal investigations underway. In four jurisdictions of concern, there are over 41,000 transactions in review worth over twelve billion dollars.
Did you know?
- Through voluntary disclosures, 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.
- As of December 31, 2016, the OTIP has received 963 calls from potential informants and 407 written submissions. Due to information received through this program, over 218 taxpayers are currently under audit.
Backgrounder: Offshore Compliance Advisory Committee
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