Feigenbaum Law

Canada Plans to Crack Down on Offshore Tax Evasion

Personal Tax Planning
March 16, 2018

An inconspicuous section buried within an almost 80-page supplementary tax measures document in the federal government’s most recent budget may mean that confidential information about Canadian taxpayers could soon be shared with police and other authorities around the world.

The government has noted its intention to provide police and tax authorities with enhanced powers to fight tax evasion and to advance international investigations into serious related crimes, including money laundering and terrorism financing. The annex states:

The sharing of information internationally for the investigation, prosecution and suppression of serious criminal offences, both tax-related and non-tax-related, is vital to the global fight against serious crime and is consistent with the government’s commitments to address global tax evasion and improve the fairness of the tax system.

The Current Law and Proposed Changes

Canada currently already has several mutual legal assistance international agreements which regulate reporting standards and are intended to help tax officials here understand how Canadians move money to other jurisdictions.

As a result, Canada can request information on taxpayers in the countries with which it is in a mutual legal assistance partner relationship with. However, while many of Canada’s partners in these agreements can share tax information in response to a Canadian request, Canada currently lacks legal authority to reciprocate with such information. For instance, the CRA cannot share personal tax information with officials in another country unless those officials are investigating tax evasion.

However, under the annex, the government had proposed allowing the legal powers available under the Mutual Legal Assistance in Criminal Matters Act to be expanded and used for sharing information about criminal tax offences (i.e. tax evasion) and other related offences. This effectively means that authorities in any of the reciprocating countries may be able to obtain a Canadian taxpayers tax records and, potentially, banking information. The proposed measures will also allow the Attorney General to obtain court orders to gather and send information.

Canada has mutual legal assistance agreements with 35 other countries and bodies, including the U.S., China, Russia, and other jurisdictions.

In addition to sharing information with other jurisdictions, the proposed measures provide Canadian police with more access to tax information. Under current law, police who are investigating certain crimes can obtain a court order to obtain income tax information. Under the new proposal, police will be able to access confidential information under the Excise Act, which taxes a number of products including alcohol, tobacco, and marijuana.

Reaction to the Proposed Changes

Michael Bryant, Executive Director of the Canadian Civil Liberties Association and a former Ontario Attorney General argues that the government is using the budget to hide controversial changes. Bryant told CBC News:

If you can get something buried in the budget that nobody knows about, sometimes you can get something passed without getting the kind of heat it deserves…Well, this deserves a lot of heat from the opposition and scrutiny from media.

Bryant believes that the proposed changes may affect the civil liberties of Canadians and should be introduced as part of a separate bill. He notes that:

The big concern is that Canada would be unwittingly participating in a star chamber investigation and prosecution of somebody in another jurisdiction, or that Canadians would in essence be thrown under the bus and information would be shared with other jurisdictions that don’t have our due process and constitutional protections.

What Will This Mean Going Forward?

The proposal will ultimately require the approval of Parliament before it can become law. A spokesman for the federal Finance Department told CBC news that it has not yet been decided whether the policy will be part of the budget implementation bill, or another piece of legislation.

We will continue to follow developments in this matter and will provide updates as they become available.

In the meantime, if you have questions about how these potential changes may affect you or about personal tax planning or corporate tax planning, contact Feigenbaum Law to learn how our skilled team can assist you and provide you with comfort in knowing that you are in experienced hands. We offer services to clients in the US, Canada and around the world. Contact us at mark@feigenbaumlaw.com, or call us at (905) 695-1269 or toll free at (877) 275-4792.


Tagged: corporate tax planning, personal tax planning, tax evasion