Just I am completing my personal income tax return and assisting many others with theirs, I continue to cling to the belief that most Canadians pay their fair shares of taxes. However, it appears many do not by “hiding” their money in offshore tax havens, sometimes under the guise of estate planning. There has been a lot of publicity in the past couple of years on how wealthy individuals around the world are moving money into these tax havens in contravention of tax law and regulations. A November 14, 2016 Huffington Post article indicated the Canada Revenue Agency (“CRA”) identified 2,600 documents with a Canadian link, opened 85 investigations into Canadians, and has commenced 60 audits with respect to the now infamous Panama Papers caper.
Since the beginning of 2015, the Canada Revenue Agency (“CRA”) has collected information on all international funds transfers over $10,000. In 2016, they began focusing on 2 specific jurisdictions (Isle of Man and the Island of Guernsey) and this is to be expanded in 2017-2018 with a review of over 100,000 fund transfers to four other “yet-to-be” identified jurisdictions.
In order to combat tax evasion and tax avoidance, the CRA has created a special program dedicated to stopping the organizations that create – and promote – tax schemes which appear to be in contravention of the laws and regulations.
The CRA also started the Offshore Tax Informant Program which received over 3,000 tips as of October 31 of last year resulting in almost 200 audits and 124 active files under review.
Families and organizations should continue to explore the legal means to protect and manage their assets offshore for legitimate purposes including prudent estate and trust planning; however the actions of others has now made it absolutely necessary to adequately document all transfers offshore, no matter how legitimate the intention, in the event of a CRA review. As always, consult with your pros.