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| Kathleen Penny |
Shavone Bazarkewich |
On February 22 2017, the Canadian government responded to
the recommendations made in the sixth report of the Standing
Committee on Finance entitled: The Canada Revenue Agency,
Tax Avoidance and Tax Evasion: Recommended Actions
(standing committee report). The response generally
supported all 14 recommendations of the standing committee
report and reaffirmed the government's commitment to cracking
down on tax evasion and perceived "aggressive tax
avoidance".
Notable comments included the following:
- The government will consider whether the
reportable transactions legislation should be expanded;
- Recommendations from the Offshore
Compliance Advisory Committee's first report to the minister
will be used to review the voluntary disclosures program
(VDP). The review will be completed by March 31 2017 and will
likely result in changes to narrow the criteria for
acceptance into the VDP;
- Guidelines used to determine whether to
pursue litigation or to seek a settlement with taxpayers that
have engaged in tax avoidance or tax evasion are being
reviewed;
- The Canada Revenue Agency (CRA) will
review the informant leads program and the offshore tax
informant program in order to encourage informants to come
forward, as well as to modernise intake and interaction with
information;
- Canada's exchange of information
relationships are being, or will be, reviewed to ensure that
bank secrecy or lack of a domestic tax interest cannot be
used to deny information exchange;
- The government will strive to work closely
with other jurisdictions to fight offshore non-compliance and
international tax evasion and avoidance; and
- A report providing practical guidelines
for the implementation of a base erosion and project shifting
(BEPS) action item related to risk assessment and reporting
by large multi-national enterprises will be released in
spring 2017.
Despite setting out the differences between tax evasion, a
potentially criminal offence, and tax avoidance, a minimisation
of tax liability within the letter of the law, the government's
response sometimes failed to clearly distinguish between the
two. This is concerning when considering how the standing
committee report's recommendations will be implemented,
particularly when a number of the recommendations contemplate
the review of tax compliance mechanisms and penalties.
The government has clearly reiterated its dedication to
cracking down on tax evasion and aggressive tax avoidance. The
government's response, as well as the standing committee
report, indicates that offshore compliance will be a focus of
these efforts. In the press release announcing the tabling of
the government's response, the CRA indicated that it is
criminally investigating 20 cases of tax evasion related to
offshore accounts. In addition, the government's response
mentions that 60 taxpayers are under audit as a result of
review of the 'Panama Papers' scandal.
Kathleen Penny (kathleen.penny@blakes.com)
and Shavone Bazarkewich (shavone.bazarkewich@blakes.com),
Toronto
Blake, Cassels & Graydon LLP
Tel: +1 416 863 3898 and +1 416 863 2994
Website: www.blakes.com