Canada unveils new Offshore Tax Informant Program

This programme was first announced in the 2013 federal budget. Details about the programme are posted on CRA’s website. A similar measure previously implemented in the US, the Internal Revenue Service’s Whistleblower Office, has resulted in significant and highly publicised awards.

It appears that the design of the OTIP has been particularly influenced by the earlier IRS programme. However, there are a number of notable differences between the two:

1. International subject matter. Most significantly, as mentioned above, the OTIP will apply only to international tax non-compliance—for example, cases involving foreign property or property located or transferred outside Canada, or to transactions conducted partially or entirely outside Canada—and not (unlike the IRS programme) to tax non-compliance generally.
2. Dollar threshold. To qualify for an award under OTIP, the information provided must lead to the collection of at least C$100,000 ($91,000) of federal taxes. The IRS programme requires that the aggregate of tax and other amounts in dispute is more than $2 million to qualify for mandatory awards.
3. Award size. OTIP awards will range from 5% to 15% of the additional federal tax collected (excluding interest and penalties), generally based on the quality of information and degree of cooperation provided by the informant. The IRS programme provides awards of 15% to 30% of the amounts collected. Interestingly, the payment criteria published by the CRA suggest awards may be possible even in cases where information is “[m]ostly from public sources” and an audit would have been likely in any case.
4. Informant qualification. OTIP is subject to typical restrictions preventing participation by, among others:

• employees of the CRA and certain other government employees;
• persons who acquired the disclosed information in the course of duties for the government; and
• persons convicted of tax evasion concerning the disclosed non-compliant activity.

There is also a broad exclusion for persons convicted of certain offences involving fraud against the government or bribery of government officials, apparently whether or not the conviction is related to the disclosed tax non-compliance. This broad exclusion is interesting given that at least one prominent awardee under the IRS programme was convicted of conspiracy to defraud the US, and therefore may not have been eligible for an award had he been under the OTIP.

The restriction of OTIP to situations of international tax non-compliance is consistent with several other government initiatives, including in the recently released 2014 federal budget, which indicate a particular focus on perceived international tax abuses. Whether the programme will ultimately pave the way for a broader tax informant programme in the domestic context remains to be seen.

By principal Tax Disputes correspondents for Canada,, Sabrina Wong (Sabrina.wong@blakes.com) and Ian Caines (ian.caines@blakes.com) of Blake, Cassels & Graydon

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