If you've failed to disclose income from offshore assets, be it a Florida bank account or your Australian stock portfolio, your days of escaping the tax man may quickly be coming to an end. This past week, Gail Shea, Minister of National revenue, announced that the Canada revenue Agency (CRA) "has received information from international allies that relates to persons resident in Canada with assets offshore."
Canada is able to obtain this information using its extensive treaty network, with 90 tax treaties and 16 Tax Information exchange Agreements currently in force, with three others signed and another 11 under active negotiation.
Last month, tax commissioners from Australia, the U.K., and the U.S. announced they had obtained data that would expose cases of potential tax evasion and aggressive tax avoidance. At the time, the CRA secured a commitment from those countries that any relevant information dealing with Canadians would be shared.
On Monday, Minister Shea confirmed in a press release that the CRA is "now in possession of information on Canadians with offshore assets." The CRA called the data obtained "voluminous" and analyzing it will require "substantial review" after which the CRA said it would take any necessary enforcement actions against those suspected of avoiding Canadian tax on their worldwide income.
According to the CRA, since 2006, it has audited 7,761 cases of offshore aggressive tax planning and identified approximately $4.58-billion in associated unpaid tax. It has completed compliance actions on 340 audit cases of high-net-worth groups who were using sophisticated business structures and offshore arrangements to avoid taxes and identified more than $195-million in unpaid federal taxes.
The recent launch of Canada's whistleblower program in the 2013 federal budget, formally dubbed the Stop International Tax evasion Program, enables the CRA to pay incentive rewards equal to a percentage of the tax collected to individuals who report information of "major international tax non-compliance."
All this means if you've got something to hide, now may be the ideal time to come forward using the CRA's voluntary disclosures program. The VDP allows taxpayers to come forward voluntarily to correct inaccurate or incomplete tax returns or disclose previously undeclared domestic or foreign income. Approaching the tax man before he comes after you by making a proper voluntary disclosure may get you out of any penalties and even help you avoid prosecution.
The latest statistics show disclosures received through the VDP involving offshore accounts or assets have increased from 1,215 in 2006-2007 to over 4,000 in 2011-2012. These disclosures revealed just under $1.5-billion in unreported income and more than $400-million in federal taxes owing.
To make a voluntary disclosure, you must complete CRA Form RC199, Taxpayer Agreement - Voluntary Disclosures Program, and attach to the form your disclosure submission along with any supporting documents.
Although you can do this on your own, professional tax advice is strongly recommended.