In recent years, the Canada Revenue Agency (the "CRA")
has increased its efforts to locate Canadian offshore funds; the
release of the Panama Papers marks a watershed development in this
process. The Panama Papers leak released more than 11 million
documents from the law firm Mossack Fonseca, detailing over 200,000
offshore companies that Mossack Fonseca set up.
The impact of the Panama Papers has been significant. On Friday
July 15, 2016, it was made public that Panama signed the OECD
Multilateral Convention on Mutual Administrative Assistance in Tax
Matters (the "Convention"). The Convention is the
most comprehensive multilateral instrument to date, designed to
tackle tax evasion and avoidance. By signing the Convention, Panama
joins a network of almost 100 nations that could share information
with each other, including information about bank account holdings.
While the previous tax agreement between Panama and Canada allowed
either party to request information, the Convention facilitates
automatic information exchange between Panama and Canada. At the
same time, the CRA continues to use the documents from the Panama
Papers to audit resident Canadians who are suspected of not
reporting their income.
In Canada, taxpayers are taxed on their worldwide income.
Therefore, if a Canadian taxpayer is found to have an account
outside of Canada that has generated unreported income, the
taxpayer could be liable for interest, penalties, taxes owing and
even prosecution for tax evasion. Overall, at least 625 Canadians
are named in the Panama Papers and the CRA has already launched 45
BLG has developed expertise in handling applications under the
Voluntary Disclosures Program, which allows Canadians to minimize
or even eliminate the possibility of penalties, interest and
prosecution by the CRA. Crucially, disclosure must be voluntary,
and, therefore, must occur before the CRA conducts an
investigation. Given the increasing exchange of tax information
between nations, we invite any Canadian taxpayer to consult with
our tax lawyers to assess their personal situations.
For those of us that rely on our trusted financial advisor, thoughts of our RRSP will be put on the back shelf until early 2018, when we are scrambling to make our last-minute contributions before the deadline.
You can't say Justin Trudeau didn't warn us. He made it very clear during his campaign to become Prime Minister that he planned to introduce legislation that would be damaging to the Western Canadian oil and gas industry.
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