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A federal program that will reward whistleblowers for reporting international tax evasion is set to ramp up, and Canadians with unreported offshore income are advised to take action before it does, says Toronto tax lawyer David J. Rotfleisch.
Announced in the 2013 federal budget, the Stop International Tax Evasion Program will see the Canada Revenue Agency (CRA) pay rewards of up to 15 per cent of the federal tax collected to those who provide information on international tax non-compliance that leads to the collection of outstanding taxes in excess of $100,000, says Rotfleisch, founding lawyer at Rotfleisch & Samulovitch Professional Corporation, a boutique tax and business law firm specializing in tax dispute resolution and voluntary disclosures with the CRA.
“There is an increasing perception among western countries that tax haven abuse needs to be curtailed,” explains Rotfleisch, who adds that the United States has had a rewards program in place for some time. Submissions made to the CRA by an expert panel recommended Canada institute its own program, he says.
Rotfleisch notes that the penalties Canadians may face for international tax non-compliance vary from a simple $100 per month for failure to file an offshore asset return, to up to 200 per cent of tax evaded plus jail time if the CRA can prove deliberate tax evasion for unreported income.
In these cases, he explains, submission of a voluntary disclosure before reporting by a third party will prevent prosecution and penalties.
“The voluntary disclosure program, which we specialize in and have used successfully with many taxpayers who have unreported offshore assets and accounts, allows those taxpayers to approach CRA before CRA starts an investigation of them. By coming forward voluntarily, they obtain a tax amnesty and will not be prosecuted, will not be charged penalties and may obtain an interest reduction,” he says.
“While the program is still being geared up by CRA, it will probably be operational this year. Once it is functioning I expect CRA to publicize the program and whistleblowers will start to come forward. It is important to be proactive if anyone has unreported offshore assets or income,” he adds.