07/10/22

CANADA: CRA has identified more than $76 million in unpaid taxes from Panama, Paradise papers leaks.

As published on cbc.ca, Friday 7 October, 2022.

The Canada Revenue Agency (CRA) has identified more than $76 million in taxes owed by Canadians named in the Panama and Paradise Papers leaks of offshore accounts. But the agency can't — or won't — say whether it has collected a cent of it.

A year after the massive leak of the Pandora Papers — which led to investigations and legislative changes in several countries around the world — the CRA says its "compliance action" is still in progress and it can't say how many, if any, Canadians named in the papers are being audited or investigated.

Opposition critics say the new information shows the CRA needs to do a better job of cracking down on tax evasion and tax avoidance by wealthy Canadians.

"I would say the answers from the CRA are shocking," said NDP revenue critic Niki Ashton. "It really speaks to the way in which the Canadian government ... is not going after the ultra-rich who are getting away with tax evasion and avoiding their taxes."

"We have to ask ourselves, what is it that's driving either a lack of action or a lack of significant progress at CRA on these files?" said Conservative MP Adam Chambers. "Because we are much further behind our peers and this is about making Canadians and taxpayers pay their fair share."

In 2016, the International Consortium of Investigative Journalists (ICIJ), which includes CBC, sent shockwaves around the world by releasing the Panama Papers. The documents shed new light on the secretive world of offshore tax havens used by some of the world's wealthiest individuals, often to hide assets or reduce their tax bills.

The news stories based on the leak of more than 11.5 million documents from the former Panamanian law firm Mossack Fonseca have led to resignations, criminal investigations and the collection of more than $1.7 billion in taxes around the world.

In 2017, the ICIJ launched the Paradise Papers — stories published around the world based on 13.4 million leaked documents. The Pandora Papers, based on 11.9 million leaked documents from 14 offshore service providers, were published in October 2021.

In its response to questions placed on the House of Commons order paper and to questions asked by CBC News, the CRA said it will take time to look into the information contained in the ICIJ leaks.

"Although some taxpayers have cooperated with the CRA, the audit work will take several years to complete as many taxpayers resist complying with the requirement to provide access to books and records and are using litigation in the courts to obstruct Canada Revenue Agency (CRA) audits," the agency wrote in an e-mail to CBC.

"As a result, these audits can be time-consuming and complex."

The CRA said the initial information-gathering and data analysis for the Panama Papers alone took three years, "as many of the initially purported links to Canada did not ultimately point to Canadian taxpayers."

The CRA said that as of Aug. 26, it has completed 265 audits related to the Panama Papers which have identified $75 million in unpaid taxes. Over 150 audits are still in progress. The Paradise Papers have led to 106 completed audits that have identified $1.6 million in unpaid taxes, with over 25 audits still ongoing, the CRA said.

That's more than three times the amount of unpaid taxes previously made public by the CRA.

The agency says the amount includes tax adjustments for the years audited plus future years adjustments and gross negligence penalties.

Despite being asked repeatedly by CBC News, the CRA has yet to say how much of the unpaid tax money it has identified has actually been collected. The agency said it could not state how much of the total sum owed is being challenged in court.

In its answer to an order paper question, the CRA said it is taking the agency an average of 569 days to process and close Paradise Papers files and 444 days for Panama Papers files.

Criminal investigations into the Panama Papers are also taking years to complete.

In its answer to an order paper question, the CRA said that as of March 31, only five cases had been referred for criminal investigation. Three criminal investigations were discontinued, leaving two ongoing.

No charges have been laid. No criminal investigations have been launched as a result of Paradise Papers or the Pandora Papers.

In its response to a second order paper question, the CRA said its High Net Worth Compliance program has resulted in one conviction in connection with unpaid taxes. But while the CRA regularly publishes information about convictions, it refused to identify the case.

"While the taxpayer's name and conviction information in the enforcement notification are part of the public record, identifying that the criminal investigation started following a referral from the High Net Worth Compliance Directorate and consequently that the taxpayer is a high net worth individual would be a violation of Section 241 of the Income Tax Act," CRA spokesperson Sylvie Branch wrote in an e-mail response.

In the documents tabled in the House, the CRA said that since April of 2015, 53 cases related to aggressive tax planning and offshore compliance probed by the High Net Worth directorate have been referred for criminal investigation — including four that were referred to the Public Prosecution Service of Canada for possible criminal charges.

Between April 2015 and June 17, 2022, the directorate opened 10,160 audits and completed 8,421 of them, the agency said.

Chambers said the CRA appears to be struggling to enforce the existing tax code.

"I don't think we need to raise taxes on Canadians," Chambers said. "I think what we need to do is make sure that those who owe taxes are actually paying the taxes they owe.

"Frankly, if you look at some of the recent reports, there's a lot of money there. If people just paid what they were supposed to pay, maybe we wouldn't have to look at significant tax increases for the rest of the country."

Chambers said he would like to see Canada's tax code simplified.

"We do need a significant review of the tax code to reduce complexity but also to give authorities the tools to prosecute and convict and uncover tax evasion activity," he said.

Ashton said the CRA's track record on going after wealthy tax cheats sends the wrong message to other Canadians.

"At a time of economic crisis for many Canadian families, what many are seeing is that there's one set of rules for one set of people, the rich in our country, and one set of rules for everybody else who has to pay their fair share," she said.

"So let's close that gap and let's see the Liberals take tax evasion and tax avoidance seriously by taking immediate action."

Ashton called on the government to close tax loopholes and give the CRA the resources necessary to go after tax evasion.

Chambers and Ashton both said they would like to see parliamentary committee hearings on the CRA's track record on cracking down on offshore tax evasion.

D.T. Cochrane, an economist with Canadians for Tax Fairness, said CRA employees take the issue of tax avoidance seriously but need more resources.

"We know from people working at the CRA that they take the issue very seriously and they are pursuing this as vigorously as they can, but they lack a lot of the resources that are necessary," he said. "Which is why Canada is lagging a lot of its international compatriots in dealing with the Panama Papers, the Paradise Papers, the Pandora Papers."