Canada has revelead that from the 3,348 non-resident entities and 2,700 potential beneficial owners identified in the Panama Papers data leak as having links to the country, it only did 150 taxpayer audits and a few tax reassessments.
Canada's Offshore Compliance Advisory Committee (OCAC) report analysed the Canada Revenue Agency's (CRA's) use of the information it received from the so-called ‘Panama' and ‘Paradise Papers'. In both incidents, electronic document caches held by law firms (Mossack Fonseca in Panama and Appleby in Bermuda) were obtained by the self-styled International Consortium of Investigative Journalists (ICIJ).
The report was made public at the same time that CRA revelead that Canadian corporations avoided paying between C$9.4bn and C$11.4bn in taxes in 2014.
Our Government is committed to cracking down on tax evasion and aggressive tax avoidance, in Canada and offshore"
The CRA's initial review of the leaked data identified about 16,000 items with a potential connection to Canada, though they did not contain Canadian tax identification numbers, or even Canadian addresses in some cases. The CRA also obtained information from a major Canadian financial institution that had used Mossack Fonseca to set up approximately 450 offshore corporations for clients, both Canadian and non-Canadian.
From this review, 3,348 non-resident entities (corporations, trusts and similar entities) were identified as potentially connected to Canada, involving about 2,700 potential beneficial owners, of whom about 80% were individuals and the rest were corporations and trusts. Of the potential beneficial owners identified in the initial review, about 72% were found either to be non-residents of Canada or otherwise not subject to Canadian tax or not ultimately identifiable from the information available. Where the owners were found to be non-resident, information was provided to the relevant foreign tax authority, resulting in provision of information to 19 countries.
Some of the remaining beneficial owners had either been previously audited, had died or were otherwise low risk, or had already made voluntary disclosures. Of the remaining 670 cases, about 150 Canadian taxpayers have been or are under audit and some reassessments have been raised. Three Canadian promoters of aggressive or evasive offshore structures associated with the Mossack Fonseca firm have been identified.
The parallel ‘Paradise Papers' investigation by the CRA found 2,400 persons or entities apparently connected to Canada named in the documents stolen from Bermuda law firm Appleby Global. About 1,500 of those have been matched to names in CRA records (1,150 individuals and 315 corporations). As a result of this, the CRA has audited 30 targets, mainly multinational corporations, and no reassessments have yet been raised.
Canadian companies avoided up to C$11B in taxes in 2014
The federal tax agency released its final report Tuesday on Canada's tax gap — taxes legally owed vs. those collected — which focused on corporate taxes. They found that in 2014, small Canadian companies managed to dodge C$2.7bn and C$3.5bn in taxes, while bigger companies avoided paying between C$6.7bn and C$7.9bn
The analysis showed that between 24% to 29% of all corporate income taxes were not paid that year.
"Our government is committed to cracking down on tax evasion and aggressive tax avoidance, in Canada and offshore," Minister of National Revenue Diane Lebouthillier said in a statement. "This information will help the CRA evaluate its approaches and better target compliance actions to ensure a tax system that is fair and equitable for all Canadians."
Whistleblowers — lured by the promise of payment — are a relatively new method of detecting offshore tax avoidance and evasion being used by the CRA, the report says.
Since 2014, the agency has been gathering tips from the public about Canadians engaging in offshore tax avoidance and evasion through its Offshore Tax Informant Program. Informants who provide "credible and specific information about major international tax non-compliance" stand to receive award payments based on a percentage of the recovered taxes.
To date, the program has received more than 1,200 calls, 500 written submissions and produced 30 contracts with informants, identifying $29 million in federal taxes and penalties, the report says. Of that, the CRA has collected more than C$19m and paid out C$1m in rewards to informants.