To preface this article, it should be clarified what “tax evasion” and “tax avoidance” is. Tax evasion is the act of avoiding tax by disregarding taxation laws and not reporting taxable income. Abusive tax avoidance refers to tax planning to unfairly minimize taxes payable. Many individuals typically express concern regarding the latter, as aggressive tax planning by unsavoury advisors takes advantage and twists the rules of taxation to produce a “too good to be true” scenario that has no legitimacy in the Income Tax Act.
In the wake of the Panama Papers, the Government of Canada has increased their commitment to cracking down on both tax evasion and abusive tax avoidance. CPA Canada has also issued statements in support in their endeavours. To that effect, the Government of Canada will invest $444 million to augment the CRA’s ability to “detect, audit, and prosecute tax evasion – both at home and abroad.” Some initiatives include:
- Building on their current ability to collect information on all international fund transfers over $10,000 by also investigating potential tax evasion in an entire tax jurisdiction. The first jurisdiction that will be examined will be the Isle of Man, with other jurisdictions to be announced;
- A new program will be created to target tax avoidance and tax evasion schemes for the wealthy, resulting in a “twelve-fold increase in the number of tax schemes” to be investigated by the CRA and apply penalties and forward cases for criminal investigation where appropriate. The program is expected to bring in 100 additional auditors and result in 3,000 investigations per year;
- Legal counsel will now be included in investigation teams to expedite the court process;
- An independent advisory committee will be created to target offshore tax planning and aggressive tax planning strategies
The CRA is expecting the initiative to return $2.6 billion over 5 years. Through their Voluntary Disclosure Program, the CRA is expected to examine $1 billion in hidden income in this year alone.
S+C Partners LLP offers an expert competent team to produce sound, fair and legitimate tax planning. Should you feel exposed to any potential tax issues, please feel free to reach out to our office.