A while back there have been numerous media reports about the Canada Revenue Agency (CRA) looking into companies and wealthy Canadians stashing their dough in offshore tax havens. The act of sheltering taxable income in countries such as Barbados and the Cayman Islands costs Canada billions each year.
According to the organization, Canadians for Tax Fairness, the money Canadian corporations held in offshore tax havens reached more than $199 billion in 2014.
What has not been known until recently, is that the CRA had offered amnesty to several wealthy people caught using an offshore tax scheme on the Isle of Man, according to a report by a CBC News/Radio-Canada investigative report.
Some two years ago, the CRA was proving a tax avoidance scheme by professional services company KPMG. In order to recover millions in unpaid taxes, the CRA sought the federal court’s assistance in February 2013, to get KPMG to release a list of its multi-millionaire clients who places their money in an Isle of Man tax shelter scheme. KPMG filed a motion to quash the judge’s order and the court sat dormant before the court for some time.
The scheme was described by the CRA as “grossly negligent” and had “intended to deceive” the minister of revenue.
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At least, $130 million was estimated to have been invested in the scheme.Twenty- six clients were known have invested a minimum of $5 million using shell companies in the Isle of Man. Huge penalties were assessed for clients involved in the scheme.
In September 2015, a KPMG lawyer filed a letter in court which indicated that 15 clients had “self-KPMG identified” to tax authorities.
The investigative news team, however, obtained a copy of a confidential offer signed on May 1, 2015, by CRA’s manager of offshore compliance, indicating that the tax agency had offered some KPMG clients a deal.
The document contained a promise from the CRA to the KPMG clients, that the tax agency will not impose any fines or penalties against them for involvement in the scheme if they agree to pay their back taxes and interest on their offshore investments which they failed to report to the CRA.
The CRA declined to discuss details of the leaked documents and did not say how many of KPMG’s clients accepted the amnesty offer. The CRA said it normally resolves tax disputes through settlements.
However, at least, one tax lawyer told CBC he thought the offer was “outrageous.”
Duane Milot represents middle-income taxpayers in disputes with the CRA. “The CRA appears to be saying to Canadians, ‘if you’re rich and wealthy, you get a second chance, but if you’re not, you’re stuck.’”