International Tax Havens and the Paradise Papers
The Paradise Papers, a leak of 1.3 million records from offshore law firm Appleby and the corporate registries of 19 tax havens, show that roughly 3,300 Canadian companies, trusts, individuals, and foundations are named in the largest ever leak involving Canadians who keep money in international tax havens.
This leak has information on hundreds of Canadian companies and individuals who use offshore trusts and corporations in countries where they pay little or no tax, including Bermuda and the Cayman Islands. Such a strategy can be used to legally avoid paying taxes in Canada, but it can also lead to potentially criminal tax evasion.
Undisclosed Foreign Assets and Income
The anonymity provided by accounts in offshore locations has led to associations with tax evasion, money laundering and organized crime. At this point, the Canada Revenue Agency (CRA) has not yet determined if any Canadians mentioned in the Paradise Papers have done anything wrong. However, the CRA is “reviewing links to Canadian entities and will take appropriate action in regards to the Paradise Papers,” according to CRA spokesperson John Power.
The CRA says that it has invested $1 billion dollars into cracking down on tax evasion and tax avoidance, and it currently has more than 990 audits and more than 42 criminal investigations underway relating to offshore tax havens.
The CRA also says that it is working with 36 other countries in the Joint International Taskforce on Shared Intelligence and Collaboration to find ways to effectively detect and deal with tax evasion and tax avoidance.
The Paradise Papers news, as well as the ongoing efforts of the CRA to crack down on international tax evasion and avoidance, show the importance of correctly disclosing all international assets and income to the CRA. However, it’s important to do so correctly.
The CRA Voluntary Disclosure Program
The CRA Voluntary Disclosure Program (VDP) is a program designed to let people correct prior year tax returns, or file returns that should have been filed, before the CRA asks about the issue or takes any compliance action. It is designed to give people a “second chance” to correct inaccuracies or amend previous filings. Disclosing income through the VDP could provide you with relief from interest, penalties, and even possible prosecution.
However, it is absolutely crucial to file your VDP application with care. Even a small mistake could cause the CRA to reject your application. This can be very serious as the VDP process is entirely voluntary. When you make an application, you are providing the CRA with information that it may not currently be aware of. If you file a VDP application and it is not accepted, you will have given the CRA information it needs to charge you with large penalties and fines and even potentially file criminal charges against you.
Recent changes to the Voluntary Disclosure Program, as well as the CRA’s crackdown on international tax havens, have made it much more complex and difficult to apply for relief. To make sure that you meet all of the required qualifications and that you provide all relevant information when completing your VDP application, contact the experts at Tax Solutions Canada today. We are well-versed in the various nuances of the Voluntary Disclosures Program and work to achieve the most favourable outcome for our clients.