In what is becoming a familiar headline, the Washington-based
International Consortium of Investigative Journalists has announced
another leak of offshore tax haven information. The data is from a
cache of leaked internal records from the corporate registry of the
Bahamas, a known Caribbean tax haven, providing details of 175,000
Bajan companies, trusts and foundations set up over the past 25
Tax Haven Searchable Database
The data has been integrated into the searchable database set up
by the ICIJ in 2013 when the ICIJ, following the same pattern used
now and for the Panama Papers leak earlier this year, orchestrated
what was called Offshore Leaks, using 112 journalists in 58
countries to analyze 2.5 million leaked offshore files. They then
posted a searchable database with names and addresses of some
100,000 entities in offshore tax havens. The database included
Canadian taxpayers, some of whom had a high profile.
Canadian Connection to Leaked Offshore Data
This is the 2nd this year leak from the ICIJ and while much
smaller than the Panama Papers leak earlier this year it provides
more evidence of Canadian participation, and bank involvement, in
the world of offshore tax havens. The ICIJ has added the Bajan
corporate records to its searchable data base. As a result 3
Canadian banks have been identified as having registered nearly
2,000 offshore companies and private foundations in the Bahamas.
Several months ago CRA went to the Federal Court of Canada and
obtained a court order for seven years' worth of transaction
information from the Royal Bank of Canada and Citibank, N.A.,
related to accounts in the name of Cayman National Bank Ltd to
carry out a tax audit for unreported income or undeclared offshore
assets. The court application was eventually not opposed by the
banks. RBC has been named as one of the three Canadian banks in the
latest link. It is almost certain that CRA will again seek a court
order asking for release of details about the bank clients.
Bahamas Popular Canadian Tax Haven
Canada has an extensive network of tax treaties and tax
information exchange agreements (TIEA) and entered into a tax
information exchange agreement with the Bahamas in 2011. The
Canadian tax benefit to a TIEA, or a full tax treaty, is that
Canada allows Canadian businesses with offshore activity in the
Bahamas to earn profits in the Bahamas, not pay local Bajan taxes
due to the zero corporate tax rate in the Bahamas, and then bring
those profits back to Canada free of Canadian taxes.
Under the tax information exchange agreement, the Bahamas is
required to hand over confidential banking and other financial
details on Canadians with accounts there to the Canada Revenue
Agency to allow CRA to conduct tax audits of Canadian individuals
or businesses. However this information ir provided on an ad hoc
basis as requested by CRA.
It has been reported that the Bahamas has become the number 6
destination by dollar amount for money legally going offshore from
Canada. According to Statistics Canada's latest figures,
corporations and individual Canadians have nearly $33 billion in
Unreported Income and CRA Voluntary Disclosure
Having a bank account of other offshore assets is not contrary
to Canadian law, provided there is no unreported income. Canadians
are taxable on their worldwide income, even if left offshore and
not repatriated to Canada. Canadians are also required to report
their offshore assets even if the assets don't generate income.
Having unreported income or unreported offshore assets is illegal
and can result in tax evasion prosecution and jail terms . For
Canadians who have bank accounts in offshore tax havens and have
unreported income or undeclared offshore assets, the CRA voluntary
disclosure program remains a safe haven for them. If they approach
CRA before a tax audit or investigation is commenced there will be
no tax prosecution for tax evasion and no civil tax penalties. If
you have undeclared income then you should approach a Canadian tax
lawyer before CRA seeks you out.
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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