Social Policy in Ontario

No charges against Canadians who parked funds in tax havens

Posted on January 7, 2011 in Equality Debates

Source: National Post — Authors: Elizabeth Thompson

NationalPost.com – news
Friday, Jan. 7, 2011.   Elizabeth Thompson, iPolitics.ca

More than three years after the Canada Revenue Agency first learned the names of 106 Canadians with bank accounts in the offshore tax haven of Liechtenstein, nobody has been prosecuted and nobody has been fined.

While the agency has collected more than $5-million in back taxes and interest from Liechtenstein account holders, critics say the CRA isn’t doing enough to crack down on those hiding assets offshore to escape Canadian taxes.

In the case of the Liechtenstein accounts, the balances ranged from $500,000 to $12-million.

The agency defends its approach, saying “a criminal investigation is the exception, not the rule, and is considered in the most serious and egregious cases.”

The Canada Revenue Agency’s probe into bank accounts in Liechtenstein, dubbed Project Jade, began in 2007 after an employee of the secretive LGT Bank in Liechtenstein blew the whistle on hundreds of account holders around the world.

The agency says it acquired the names of 106 Canadians with accounts at the bank in the tiny European tax haven in March 2007 as a result of “Canada’s co-operation with our international partners.”

Since then, 25 Canadian residents have disclosed their Liechtenstein holdings. Under the agency’s voluntary disclosure program, those who come forward before an investigation begins can face assessments and interest charges but not penalties or criminal prosecution.

Of the 106 accounts, 67 cases had been closed by Oct. 20. Eighteen taxpayers were reassessed and 49 were not reassessed. Another 39 cases are still open — 17 of which are in the middle of audits.

Of the 67 cases that have been closed, 26 were audited by the agency.

As a result, the agency assessed $1.447-million in taxes, $1.852-million in interest and $2.5-million in penalties for a total of $5.8-million.

As of Oct. 20, however, the agency had only collected $5.023-million of that amount. While 23 of the 26 cases had been settled in full, in three cases the interest and penalties had not been collected. In two of those cases, taxpayers have filed notices of objection to the agency’s assessment.

While the largest bank account identified held $12-million and the smallest held $500,000, the agency could not provide an average account size “as the bank account balances were provided in five currencies.”

Although the agency says “compliance actions are ongoing,” no charges have been laid and no fines have been assessed.

Liberal MP Shawn Murphy said the agency is so lax that Canadians can hide assets in offshore tax havens practically with immunity. If found out, the worst penalty appears to be paying the taxes they should have paid in the first place plus interest charges, he said.

“In this case it seems pretty clear that it was a deliberate, transparent attempt to violate Canadian income tax laws,” he said.

“There are Canadians in jail tonight for offences which I consider to be much less serious.”

Bloc Quebecois finance critic Daniel Paille questioned why none of the 106 Canadians whose accounts in Liechtenstein were revealed have been charged with tax evasion.

“I’m fairly convinced that there is nobody from the riding of Hochelaga,” he said, referring to his low income riding in east end Montreal.

Paille said the government has a double standard, going after waitresses and taxi drivers “to death” while very high earners are encouraged to make voluntary declarations.

“It is practically embarrassing for a government whose motto is law and order.”

NDP finance critic Thomas Mulcair said recourse to offshore tax havens is becoming much more common than in the past and millions of dollars are being hidden around the world.

Mulcair said he hopes House of Commons finance committee hearings into the question of offshore tax havens will shed more light on the practice.

Those hearings are to resume when Parliament returns at the end of January.

Elizabeth Thompson is a senior writer for iPolitics.ca

< http://www.financialpost.com/news/charges+against+Canadians+parked+funds+havens/4075960/story.html >

Tags: budget, crime prevention, tax

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