Canada is tackling international tax evasion and aggressive tax
avoidance. It has adopted several measures to do so including a
whistleblower program and expanding reporting of international wire
transfers to the Canada Revenue Agency (CRA). The Canadian
government is also investing C$30 million with the CRA to
strengthen compliance and audit efforts.
Canada signed the OECD's Multilateral Competent
Authority Agreement (MCAA) on June 2, 2015 after committing in
the April 21 federal budget to propose legislation to implement the
Common Reporting Standard (CRS). Information received by the CRA
under the CRS, including income, account balances (or values) and
social insurance numbers, will continue to increase CRA efficiency
in curbing international tax evasion.
These developments and Canada's long-standing voluntary
disclosure program are discussed below.
Wire transfer reporting to the CRA
From January 1, 2015, certain financial intermediaries,
including banks, credit unions and trust and loan companies are
required to report international wire transfers of $10,000 or more
to the CRA. This applies to the same financial intermediaries that
are already reporting information on international electronic funds
transfers to the Financial Transactions and Reports Analysis Centre
of Canada (FINTRAC) for anti-money laundering purposes.
On January 15, 2014, the Offshore Tax Informant Program (OTIP)
was launched. The program was part of a larger package of reforms
announced in Budget 2013 under the "Stop International Tax
Evasion Program" and allows the CRA to give financial
compensation to individuals who provide information relating to
major international tax evasion which leads to the collection of
taxes owing of at least $100,000. The amount awarded will be
between 5% and 15% of the federal tax collected. In the first
twelve months of OTIP (January 2014 to January 2015), 1,712 calls
were received with 113 being eligible for the program.
Common Reporting Standard
As noted above, Canada joined the CRS on June 2, 2015 by signing
the MCAA. Canada has committed to starting CRS from July 1, 2017
with the first exchanges of information to, and from, Canada
scheduled for September 2018. Draft legislative proposals will be
released for comment in the coming months.
CRS requires financial institutions to obtain client information
for automatic exchange with participating jurisdictions on an
annual basis. The CRA will therefore receive information on
Canadian residents from over 90 other countries participating in
the CRS. This information will include gross income, details of
ownership in foreign entities, partnerships, trusts and
foundations, account balances (or values) and Canadian Social
Insurance Numbers. Similarly, Canadian banks and other financial
institutions will need to collect financial account information on
accounts held by residents of participating countries and report
this to the CRA. The CRA will then automatically exchange this
information to the foreign tax authorities where the account holder
Voluntary disclosure program
Canada has a longstanding voluntary disclosure program. If the
CRA accepts that a taxpayer qualifies for the program, the CRA will
waive penalties, will not prosecute and may partially waive
interest. The disclosure can be commenced on a no-names basis. The
conditions for a valid disclosure include (i) that a taxpayer must
not be under audit or be aware that the CRA has an intention to
begin an investigation in relation to the taxpayer, and (ii) the
taxpayer must provide complete disclosure.
Figures released by the CRA show that the number of voluntary
disclosures of offshore income and assets has nearly doubled in the
year ended March 31, 2015 from the previous 12 months with
unreported income increasing to almost C$800 million. Further, more
than 10,000 voluntary disclosures of offshore activities were made
in the past year, up from 1,215 in 2006-07. The pace of voluntary
disclosures is likely to continue as the measures discussed above
Canadian taxpayers concerned with potential past defaults should
seek advice on a voluntary disclosure before the CRA initiates an
Please do not hesitate to contact us if you wish to discuss
these matters further.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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