The CRA announced a new and aggressive campaign to crack down on
international tax evasion and will have significant additional
The CRA will be able to reward whistleblowers with up to 15% of
the tax collected as a result of information received.
Financial institutions and others who report international
electronic funds transfers to the Financial Transactions and
Reports Analysis Centre of Canada (FINTRAC) will be required to
report these transfers to the CRA.
The CRA's process for obtaining taxpayer information
from third parties such as banks will be streamlined.
Taxpayers with foreign assets and income will have additional
reporting requirements, and non-compliant taxpayers will be subject
to extended limitation periods for reassessment.
Civil penalties for failing to report foreign transactions,
assets and income can be extremely onerous. These penalties are
based on either the cost or fair market value of the underlying
assets. As a result, these penalties can be greater than the unpaid
tax. We recently saw an assessment for civil penalties of five
times the unpaid tax. The fines and penalties for criminal tax
evasion can be no more than 200% of the amount of tax evaded, in
addition to the risk of imprisonment.
The CRA offers a voluntary disclosure program to taxpayers who
want to avoid these civil penalties and the risk of fines and
imprisonment for criminal tax evasion. Any taxpayer who has omitted
to report transactions, assets or income to the CRA can come
forward to rectify their non-compliance. To qualify under the
voluntary disclosures program, the disclosure must be commenced
before any CRA enforcement action.
A successful disclosure under the voluntary disclosures program
also allows the CRA to reduce the interest assessed on unpaid tax
for years disclosed that are before the most recent three taxation
years. The program has enabled tens of thousands of taxpayers to
remediate their past non-compliance while bringing billions of
dollars of unpaid tax into federal coffers.
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