OTTAWA ? The embattled Canada Revenue Agency says it will investigate the files of potentially hundreds of Canadians included in a massive leak of financial information for alleged accounts in offshore tax havens ? if it can get its hands on the information.
Canada and tax evasion
- International tax evasion is one of three main themes to be discussed when leaders from the Group of Eight large industrialized nations ? including Prime Minister Stephen Harper ? meet in June at the G8 summit in Northern Ireland
- According to some estimates, domestic and offshore tax evasion is costing the federal government tens of billions of dollars, although the numbers are difficult to verify
- The federal government is cutting nearly 3,000 CRA jobs over the next three years and slashing the agency?s budget by more than $250 million
- Government says millions of dollars in new CRA cuts announced in last month?s budget are for internal operations and will not erode the agency?s ability to combat tax evasion
- The Canada Revenue Agency has identified approximately $4.6 billion in unpaid taxes since 2006 from international tax avoidance. The CRA won?t say how much of that has been recovered
- The federal auditor general warned last year the CRA was unable to adequately assess and track tax cheats across the country due to limited resources and weak oversight and enforcement practices. The agency has accepted the auditor?s recommendations for improvement
- The Tax Justice Network, a global advocacy group, estimates somewhere between $21 trillion and $32 trillion in unreported financial wealth from around the world is socked away in tax havens
- Canadians for Tax Fairness says international tax havens alone are costing Canada at least $7.8 billion annually. Potentially billions of dollars more are lost from unreported taxes in the Canadian shadow economy, the group says
- Tax watchdogs and opposition parties are calling on the Conservative government to publish Canada?s estimated tax gap: the difference between what the government should be collecting in taxes and what it?s actually collecting
- Many other countries such as the United States (estimated tax gap of $385 billion) and the United Kingdom (nearly $50 billion) publish a tax gap estimate
But unions, critics and tax watchdogs question how the federal government can effectively crack down on potential tax evasion when it is cutting more than $250 million and 3,000 staff from the revenue agency.
On Thursday, the CRA urged the investigative journalism group that handled the leak to deliver the government information on the Canadians ? including a prominent lawyer whose wife is a Liberal senator ? so it could begin a review.
The agency says it will also consult other jurisdictions in an effort to obtain the information.
Sensitive financial information on more than 100,000 people from around the world with accounts in well-known tax havens is included in the millions of leaked documents.
?CRA officials will review any information they receive and aggressively pursue all suspected cases of tax evasion,? National Revenue Minister Gail Shea said in a statement.
?We call on the International Consortium of Investigative Journalists to hand over this list to allow our government to crack down on tax evaders.?
Shea was unavailable for an interview.
But it appears unlikely the Washington, D.C.-based journalism group will release to the government the detailed information on hundreds of Canadians involved in the sweeping investigation.
?That isn?t our role as journalists,? said Gerard Ryle, director of the ICIJ.
The leak of the alleged offshore financial information, including to the CBC, highlights the challenges the CRA faces in combating tax evasion at a time when it is facing budget and staffing cuts.
?Because the government hasn?t put any efforts into overseas tax evasions, well-to-do Canadians have come to the conclusion they can put their money into overseas tax havens,? said Liberal Sen. Percy Downe, ?an outspoken critic of the government?s efforts to crack down on tax cheats. ?If we don?t have confidence in the tax system, it undermines it for everybody.?
Reports on Thursday named Tony Merchant, a high-profile lawyer from Saskatchewan who is married to a Liberal senator, as one of the Canadians allegedly hiding money in overseas tax havens.
The CBC reported that Merchant allegedly placed $1.7 million into an offshore trust in 1998, an account that listed Sen. Pana Merchant as a beneficiary.
Senate leaders were closely watching the allegations against Tony Merchant on Thursday, but would not comment on Sen. Pana Merchant?s connection because it didn?t directly involve her Senate duties.
There was no response to messages seeking comment left Thursday at the offices of Merchant?s law firm in Regina and Edmonton, where a staff member said he?s attending a trial, and at the Ottawa office of his wife, Sen. Pana Merchant. She, plus the couple?s three sons, are named as beneficiaries of the account, CBC said.
Regina lawyer Gord Kuski, who has represented Merchant in several skirmishes with the Law Society of Saskatchewan, said on his voicemail he?s on holiday.
One of the few people who did comment was Tom Schonhoffer, executive director of the Law Society of Saskatchewan, who saw Wednesday night?s CBC broadcast, but said the society has no action to take on this matter. ?Our job here is to govern his professional role, his relations with clients, the administration of justice with other lawyers, that type of thing. This is in his personal life.?
There might be a time when Merchant?s personal and professional life intersect, ?but at this point, they are just allegations and we regard it as a Canada Revenue Agency problem and investigation. They have the tax returns and the expertise ? if they decide to charge him with an offence of tax evasion, then we?d be very interested in the result of that, of course. It may well affect his licenture and his ability to practise. but I don?t think there?s anything a law society can do at this point based on this news report.?
That?s not to say Merchant doesn?t have his share of troubles with the law society.
Last year, a disciplinary committee issued a three-month suspension against Merchant for two counts of conduct unbecoming a lawyer stemming from his handling of a family law matter. The suspension has been put on hold as Merchant takes the matter to the Saskatchewan Court of Appeal. He has been sanctioned for conduct unbecoming a lawyer on three previous occasions dating back to 1986.
Asked about the CBC report?s apparent invasion of Merchant?s privacy, Schonhoffer added, ?What do all these leaked documents mean? Are they accurate. Are they verifiable? I presume that CBC has done their due diligence on some of these questions, but it is a very, very interesting question,? he said, noting the imagery in the CBC report of?hands stuffing cash into an envelope.
?You see that and it conjures up the worst, doesn?t it??
?It was a very damaging news report for him.?
There needs to be more resources and more people on this issue
Sen. Pana Merchant?s financial disclosure filings going back to 2005 don?t list any assets in trust accounts. Senate rules require senators to disclose holdings that could lead to conflicts of interest, for themselves and their spouses.
While senators? disclosures are publicly available, the disclosures for their spouses are not.
The federal government pledged in last month?s budget to crack down on international tax evasion with a series of new measures ? including offering cash rewards to whistleblowers ? at the same time it slashed tens of millions of dollars in additional funding from the Canada Revenue Agency.
Foreign bank accounts ? they?re not just for the secretive
Banking abroad is as ordinary as a winter home in Florida or a business office in London.
Most of the accounts are for convenience, such as paying utility bills for a condo beneath the palms and getting access to an ATM without paying heavy fees when drawing foreign U.S. currency.
Continue reading.
The government insists the new budget cuts are for internal operations and will not erode the agency?s ability to combat tax evasion.
Gary Corbett, president of the Professional Institute of the Public Service of Canada ? which represents nearly 15,000 CRA employees, including more than 11,000 auditors ? said 45 of their members received ?affected? notices Thursday, meaning they could face layoffs or be shuffled to a different job.
Most of the affected members were in CRA compliance jobs, he said. The union wonders how the agency can possibly strengthen its efforts on international tax evasion when it?s facing such large budget cuts.
?There needs to be more resources and more people on this issue so that they can make sure they get some of this money that rightly belongs in Canada,? Corbett said.
Canadians for Tax Fairness, a domestic advocacy group, says international tax havens alone are costing Canada at least $7.8 billion annually, but the actual number is probably in the tens of billions of dollars.
The latest leak of financial information is ?just the tip of the iceberg? of the amount of Canadian cash stashed in offshore tax havens, said Dennis Howlett, executive director of Canadians for Tax Fairness.
?There?s a lot more out there,? Howlett said.
?Even though there were a few measures in the budget on tax havens, they (the government) haven?t put their money where their mouth is in terms of really putting the resources into Canada Revenue Agency,? Howlett said.
Downe asked the parliamentary budget office to study the size of the tax collection gap, but the government blocked his efforts.
?The government doesn?t even know and they appear not to even want to know how big the gap is,? Downe said.
As part of its efforts, the CRA will launch the Stop International Tax Evasion Program aimed at reducing international tax evasion and avoidance.
Under the program, the agency will pay rewards to whistleblowers, of up to 15 per cent of the federal tax collected, for information leading to tax assessments exceeding $100,000.
Other measures include improving the process for the CRA to obtain information concerning unnamed persons from third parties such as banks, and requiring banks and other institutions to report international electronic fund transfers of $10,000 or more.
With a file from The?Regina Leader-Post
Source: http://business.financialpost.com/2013/04/05/offshore-tax-haven-cra/
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