Statement Article from  Canada Revenue Agency

Statement from the Canada Revenue Agency

***Please note this content will be updated as required


UPDATE – May 5, 2016

May 5, 2016: To provide assurances that due diligence was followed, the CRA commissioned an independent third party to examine its processes and decisions in relation to audits of a tax structure by KPMG LLP and the CRA’s efforts to obtain the names of all participating taxpayers.
Summary Findings: Independent review of the CRA’s Management of the KPMG Offshore Tax Scheme


Recent media coverage has focused on the Canada Revenue Agency's (CRA) actions to address aggressive tax avoidance and offshore tax evasion, particularly by clients of the accounting firm KPMG, as well as the Agency's relationships with its stakeholders. The CRA wants Canadians to have complete and accurate information on these issues.

The KPMG case

The Income Tax Act protects the confidential information of taxpayers by prohibiting the CRA and former employees of the CRA from speaking about a particular taxpayer or case, beyond what is on the public record.

However, publicly available court records demonstrate that it is through the efforts of the CRA that the KPMG offshore tax avoidance scheme was discovered, many of its participants have already been identified, and that the case is actively being pursued. This includes audits and reassessments of several taxpayers known to the Agency.

Further, an additional 15 of KPMG's clients whose identities were sought by the CRA in the Federal Court have identified themselves, and the Agency is auditing and re-assessing these individuals.

The CRA has taken legal action to obtain the identities of all remaining KPMG LLP clients who have not been identified to date.

The KPMG case is an active file and the CRA's work is not concluded. The Agency will pursue this case to the fullest extent possible, as we do with all other cases of aggressive non-compliance. However, because it is currently before the courts, any further comment from the Agency on this specific case would not only be contrary to the law but could also jeopardize the legal action currently underway.

Offshore Tax Evasion and Aggressive Tax Avoidance

The CRA believes firmly that all participants in offshore tax evasion and tax avoidance schemes must be identified and brought into full compliance with their tax obligations.

The CRA also takes action against tax professionals who offer, assist or create opportunities for clients to participate in offshore tax evasion and tax avoidance schemes. The willful failure to follow tax laws or to counsel others to evade taxes has serious consequences and penalties and could lead to prosecution. The CRA will pursue these to the fullest extent possible, based on the law and the facts of each case.

As we do so, taxpayer fairness is paramount. There is no preferred treatment of certain taxpayers who are non-compliant over others. Relevant laws and compliance actions are applied evenly and without favour. The CRA has a statutory duty to assess the amount of tax payable, based on the facts of the case, the evidence gathered, and strict application of the law.

Court cases related to tax matters can be complex and sometimes lengthy. Where appropriate, including with matters before the courts, and in consultation with the Department of Justice, the CRA seeks to resolve matters through a settlement offer that is based on facts and in accordance with the law. Early dispute resolution, where appropriate, is in the public interest—litigation is costly for everyone and the outcome of complex, tax-related litigation processes may be unsuccessful. In fact, the Fall 2013 report of the Auditor General of Canada on the CRA's management of cases related to Lichtenstein recognized that settlements are useful and appropriate in allowing the CRA to identify participants and learn more about the nature of complex offshore schemes.

The use of confidentiality clauses in negotiated settlement agreements is on a case by case basis and is typical in legal proceedings involving CRA audit and enforcement programs. Each taxpayer's case is different, and, in some cases, the success of negotiations may be jeopardized if comparisons are made to others where the facts of the case are not the same.

Results

  • CRA auditors conduct over 120,000 audits every year that result in more than $11 billion in additional taxes assessed as well as penalties and interest. Over $7 billion of that amount – about two-thirds – involves international and large business aggressive tax planning, including high net worth individuals and multi-nationals. 
  • Since January 1, 2015 all international electronic funds transfers over $10,000 are reported directly to the CRA. To date we have received over 16 million records of transfers into and out of Canada. Our ability to identify non-compliance by those using offshore schemes has never been better. More information on this program can be found here: http://www.cra-arc.gc.ca/gncy/cmplnc/eft-ti/menu-eng.html
  • Information sharing and international cooperation are key to deterring international tax evasion and aggressive tax avoidance, and to identifying non-compliance and abuse.  Canada now has one of the most extensive tax treaty networks in the world, with 92 tax treaties and 22 Tax Information Exchange Agreements (TIEAs) in force.
  • The Offshore Tax Informant Program (OTIP) allows the CRA to give financial awards to individuals who provide information related to major international tax non-compliance that leads to the collection of taxes owing. As of February 29, 2016, the OTIP has received over 2,830 calls, 762 of which have been from potential informants, 304 written submissions, and has entered into contracts with a number of informants. You can find out more about the OTIP by going to: http://www.cra-arc.gc.ca/otip/
  • This year, through the Voluntary Disclosures Program (VDP), the CRA is on track to identify $1 billion in income that would otherwise have been hidden. That is an increase of almost 400 percent over the last six years. More information on VDP can be found here: http://www.cra-arc.gc.ca/voluntarydisclosures/
  • This fiscal year, the Agency is on track to complete over 9,000 audits related to aggressive tax planning, with an additional $1.6 billion added to the public purse as a result.

Stakeholder relations

The CRA, like all government organizations, has a responsibility to listen to those affected by its policies and programs, including individual taxpayers, businesses, and those who represent them. In meeting with these stakeholders, we help them to understand the requirements of Canada's tax system and improve compliance. In turn, they help the CRA to understand how well the tax system is working, how it affects taxpayers, and whether the CRA is meeting its objectives.

The CRA works hard to strike the right balance between ensuring that its operations are open and transparent to the public it serves while also avoiding circumstances that could lead to real or perceived conflict of interest or preferential treatment.

An important way that we do this is to ensure that access to CRA officials by taxpayers is available to all. Meetings held with associations such as the Chartered Professional Accountants of Canada, The Canadian Federation of Independent Business, the Efile Association of Canada, community volunteers and organizations are important in improving the tax system and tax compliance. So are the communications we receive through our call centres, which receive over 23 million calls every year. Correspondence from taxpayers is carefully reviewed by CRA officials, including Assistant Commissioners, on a regular basis. The CRA also conducts hundreds of outreach sessions and consultations with individual Canadians and small and medium-sized businesses across the country annually.

When meeting with stakeholder associations, CRA officials adhere at all times to their obligations under the Agency's Code of integrity and professional conduct, and Directive on conflict of interest, gifts and hospitality, and post-employment.

In working with stakeholder associations, employees do not discuss specific taxpayer files. These types of discussions can only happen with the taxpayer or with his or her authorized representative. In all circumstances, CRA employees are prohibited from offering preferential treatment or privileged access to anyone dealing with the CRA.

The CRA Directive on conflict of interest is clear. It requires all CRA employees to report to a delegated manager any gift, hospitality, or benefit that is offered:

  • on a regular basis;
  • that could result in preferential treatment; or
  • is valued over $50.

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Hon. Diane Lebouthillier Canada Revenue Agency Economics and Industry

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