Offshore Bank Accounts Under CRA Scrutiny

Reproduced today from the CRA website:

Ottawa, Ontario, September 30, 2010 … The Honourable Keith Ashfield, Minister of National Revenue, Minister of the Atlantic Canada Opportunities Agency and Minister for the Atlantic Gateway, today announced that the Canada Revenue Agency (CRA) has recently received information from the government of France about HSBC account holders.

Since receiving the information, the CRA has continued to analyze account data to ensure that the Canadian holders are declaring all their income for tax purposes. The CRA has begun a series of audits.

“This is just another example of how our government is taking action to crack down on people who unfairly exploit offshore accounts,” said Minister Ashfield. “We know that most Canadians pay their taxes and play by the rules. That’s why we are taking aggressive action to recover money owed to Canadians.”

The CRA can confirm that over 1,000 bank accounts are linked to Canadian taxpayers. The largest accounts are now being audited, and others will follow. All accounts that are linked to Canadian taxpayers will be reviewed.

Through communication with international partners, the CRA continues to benefit from the increased flow of information under its tax treaties. In this regard, the CRA collaborates extensively with the Organisation for Economic Co‑operation and Development, the Seven-Country Working Group on Tax Havens, and the Joint International Tax Shelter Information Centre.

Last year, the CRA uncovered over $1 billion in unpaid federal tax from Canadian taxpayers hiding assets and accounts offshore or through other international transactions. For the same period, the CRA identified another $138 million in unpaid tax through the CRA’s voluntary disclosure program. Just five months into this fiscal year, the number of last year’s disclosures has already been surpassed.

Those Canadians who have undeclared income in foreign jurisdictions can make a voluntary disclosure and pay only taxes owing plus interest. The CRA’s Voluntary Disclosures Program (VDP) allows taxpayers to come forward and correct their tax information.

Not reporting income from foreign sources is illegal. Tax recovery continues to grow as a result of the CRA’s international efforts and audit processes. The CRA is committed to continuing collaborative work to protect Canada’s tax base.

2 thoughts on “Offshore Bank Accounts Under CRA Scrutiny

  1. This is a drop in the bucket. Canadians legally wash billions of dollars offshore under certain Canadian tax treaties.

    Take Barbados for example.

    Under the terms of the Canada-Barbados Tax Treaty, Barbados, a country with a GDP of less than $5.1 billion, nominally “receives” between $40 and $75 billion annually in foreign direct investment (FDI) from Canadian corporations and individuals each year. That makes Barbados, a small island country with few natural resources, the third-largest recipient of Canadian investment, behind only the United States and the United Kingdom.

    Most Canadian FDI to Barbados continues on to other tax jurisdictions, including back to Canada, tax free.

    Canadian FDI to Barbados amounts to over $140,000 annually for every man, woman and child on the island. Compare this to the $800-1,100 per capita FDI in the US or the UK.

    Despite this large scale Canadian investment in Barbados, the per capita GDP of Barbados is less than half what it is in the US or the UK. And there is comparatively little cross-border trade and little evidence that the $40 billion is actually invested on the island. How else can one explain the stock market cap in Barbados of only around $12 billion?

    And what about reciprocal FDI between Barbados and Canada? Fact: For every dollar in FDI that Canadians send to the island, Barbados sends a penny back. Compare this with Canadian FDI to the US or the UK: For every dollar Canada sends, Canada receives about a dollar back.

    The issue is not to destroy international business investment and corporate RSP business in Barbados. Rather, why not have a simple mechanism in place that allows competent and ethical Canadian companies to truly invest in the Barbados economy to help them improve their society?

    It is a compounding problem: Foreign investments of Canadian residents have, at minimum, the advantage of rather permanent Canadian tax deferral, and the reinvestment of income amounts during the deferral period compounds the deferral advantage, and compounds the ‘cost’ of the treaty or treaties upon which such structuring relies. Cumulative outbound FDI Canada to Barbados has accumulated on a net basis over many years and is reported at original cost of investment without taking into account the reinvestment of earnings offshore and therefore without considering the income and capital gains effects of compounding.

  2. Let’s have The honorable Keith Ashfield’s response to the blatant improprieties outlined in Allan Browne’s expose of the Canada-Barbados Tax Treaty. Beyond doubt, Keith’s the boy to chase down small fry in cases of income concealment, but don’t expect him to go head to head with any of his Conservative pals who are making all the big money overseas.
    Keith Ashfield’s moral posturing does nothing to conceal the fact that we are currently governed by “a parcel of rogues in a nation”.

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