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The Canadian Government has announced the establishment of an independent advisory committee on offshore tax evasion and aggressive tax planning.
The Offshore Compliance Advisory Committee (OCAC) will be composed of seven independent experts with legal, judicial, and tax administration experience. It will meet for the first time in spring 2016 and will initially focus on developing strategies to help alleviate and discourage offshore non-compliance and studying the administrative policies being used by other tax administrations to address such issues. It will also provide advice to the Canada Revenue Agency (CRA) on measuring the tax gap, and recommend ways to improve the CRA's criminal investigation functions and to better understand practices related to the promotion of tax schemes.
The announcement comes in the wake of the leak of 11.5m papers from Panamanian law firm Mossack Fonseca relating to bank accounts and companies in 21 offshore jurisdictions over a nearly forty-year period.
Revenue Minister Dianne Lebouthillier said: "Our Government is working hard to give Canadians greater confidence that the tax system is fair to everyone. Those who hide income and assets offshore or try to evade or avoid paying the tax they owe will be identified and will face consequences."
In response to the "Panama Papers" leak, the CRA has announced that it will accelerate its compliance actions on the offshore activities of certain Canadians, based on information it has collected from international electronic funds transfers, the Offshore Tax Informant Program, and data exchanged through its treaty network.
The Government confirmed that the CRA will this month begin contacting approximately 350 individual taxpayers and 400 businesses that have had transactions involving the Isle of Man. More than 60 audits related to these taxpayers are already underway.
The CRA has asked the International Consortium of Investigative Journalists and a range of Canadian media outlets to provide it with the full Panama Papers data set.
The CRA has issued a statement explaining the steps currently being taken by the Government to crack down on tax evasion and avoidance. It pointed out that in the recent Budget the Government committed to invest CAD444.4m (USD344.4m) in the CRA's compliance activities.
This money will be used to hire additional auditors and specialists, and increase the number of examinations focused on high-risk taxpayers from 600 to 3,000 a year. 100 additional auditors will investigate high-risk multinational corporations, with the aim of collecting an extra CAD500m in revenue over the next five years. The CRA will also create a special audit program dedicated to stopping the organizations that create and promote tax evasion and avoidance schemes. This action will result in a twelve-fold increase in the number of tax schemes examined by the CRA, the Government said.
The Government added that the CRA's investigation teams will receive legal counsel to ensure that cases can be rapidly brought to court. The CRA will begin work to estimate the tax gap, and will use the latest technology and work with larger investigative teams in an effort to detect more cases of tax evasion.
Lebouthillier said: "Our Government has promised Canadians a tax system that is fair and responsive to their needs. The unprecedented investment made in the CRA's activities through Budget 2016 will fundamentally change our ability to identify and pursue both domestic and offshore tax evasion and avoidance. That means a tax system that is applied fairly to all and delivers real results."
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