International Tax Information Leak Exposes 450 Canadian Tax Cheats

On April 4th, the Canada Revenue Agency released two separate statements in regards to recent media coverage that has identified rampant disregard for Canada’s tax laws, specifically hiding money in offshore tax havens.

CBC News and media outlets in 35 other countries reported earlier in the week that they were uncovering information regarding certain transactions as part of a huge leak of offshore financial information received by the International Consortium of Investigative Journalists in Washington D.C. Many believe it is one of the largest leaks of financial data in history.

The information procured by the Consortium exposed more than 130,000 taxpayers from various countries around the globe who have been hiding their money from their home government; the list included about 450 Canadians.

Perhaps the most high-profile Canadians on the list are Pana Merchant and her husband, prominent Prairie lawyer Toney Merchant. Merchant, also known as the class-action king, evidently tried to hide about $2 million in the Cook Islands, a New Zealand territory famous for its financial secrecy.

Over the last six years, the CRA has conducted approximately 8,000 compliance actions and reassessed in excess of $4.5 billion in federal taxes as the result of its efforts. In her announcement, Revenue Minister Gail Shea called on The International Consortium of Investigative Journalists to hand over their list to allow the Canadian Government to crack down on tax evaders and, in addition, repeated new measures from the recent Federal Budget that will be used to combat international tax evasion:

• Requiring certain financial intermediaries, including banks, to report to the CRA international electronic funds transfers of $10,000 or more.
• Introducing a new Stop International Tax Evasion Program through which CRA  will make payments to individuals with knowledge of major international tax non-compliance that lead to collection of additional taxes.
• Extending the normal reassessment period by three years for taxpayers who have failed to report income from a specified foreign property on their annual income tax return and failed to properly file the Foreign Income Verification Statement (Form T1135).
• Revising the T1135 Foreign Income Verification Statement to require reporting of more detailed information.
• Streamlining the process for the CRA to obtain information concerning unnamed persons from third parties such as banks.