Question Period Note: TAX EVASION – PANAMA PAPERS

Why does the Canada Revenue Agency have so little to show for results after five years of the Panama Papers data leak?

• The Canada Revenue Agency is committed to protecting the integrity of the Canadian tax system by combating the abusive use of offshore arrangements for the purposes of Canadian tax avoidance and evasion.
• Since 2016, the Agency has identified approximately 900 Canadian individuals, corporations and trusts for evaluation and review to identify those that may have potential Canadian tax non-compliance.
• Wealthy taxpayers often have complex tax arrangements resulting in lengthy and time consuming information gathering processes during the course of the audits completed by the Agency. A significant number of Canadian taxpayers audited are also using the court system to avoid providing documents and information to the CRA.
• As of December 25, 2020, there have been close to 200 taxpayer audits completed of which approximately 35 audits have resulted in assessments of more than $21 million in federal taxes and penalties.
• Currently, there are 160 complex taxpayer audits ongoing.
• As of December 25, 2020, there have been 5 criminal investigation cases related to the Panama Papers with 3 cases being discontinued at the investigation stage and 2 cases that are currently underway. To date, no criminal charges have been laid. No search warrants have been executed in the last 12 months.

April 3rd, 2021, marked the fifth anniversary of the Panama Papers data leak, which included approximately 11.5 million documents held by the Panamanian law firm Mossack Fonseca.
Since that time, the Canada Revenue Agency (CRA) has been able to gather intelligence from domestic and international sources and was able to identify approximately 900 Canadian individuals, corporations and trusts for evaluation and review to identify those that appear to have potential Canadian tax non-compliance.
It is important to note that the presence of a person’s name on this list does not imply tax non-compliance from a Canadian tax perspective. Generally speaking, over 60% of taxpayers identified were found to have complied with their tax reporting obligations and, as such, had no tax consequence. By the end of 2019, all Canadians identified in the Panama Papers had been reviewed by the Agency and those with risk of non-compliance have been identified for audit.
At this time, the Agency can confirm that as of December 25, 2020, there have been close to 200 taxpayer audits completed of which 35 of these audits have resulted in assessments of more than $21 million in federal taxes and penalties. Another 160 are audits currently ongoing. It is important to emphasize that typically, less complex audits are among the first to be concluded and as such, additional federal taxes and penalties are anticipated in the future as the more complex and challenging audits are completed.
Wealthy taxpayers often have complex tax arrangements resulting in lengthy and time consuming information gathering processes during the course of the audits completed by the Agency. These audits can result in significant assessments and adjustments to numerous tax years. In addition, after assessments have been raised, it can result in balances owed where there are often instances of multiple or partial payments and offsetting adjustments on their tax accounts. The Agency is not in a position to directly attribute amounts collected to specific audit adjustments. However, based on an October 2020 study by the Parliamentary Budget Officer of recent federal budget investments in the Agency tax compliance operations, it was generally estimated that approximately 80% of total audit fiscal impact will materialize and result in successful collection actions.
The Panama Papers was and continues to be challenging and complex workload. The Agency faced other hurdles including challenges in identifying potential offshore assets for the purpose of following the money trails and identifying the actual individuals who were non-compliant. Many times, those individuals or entities that were listed in the Panama Papers data leak were not always Canadians and, in a large number of instances, did not even use the entities that were created and identified. The Agency continues to progress and finalize audits related to the Panama Papers and, where warranted, refers files to the Criminal Investigations Program when there may be criminal activity.
As of December 25, 2020, there have been 5 criminal investigation cases related to the Panama Papers. 3 of the cases were discontinued at the investigation stage and 2 criminal investigations are currently underway. To date, no criminal charges have been laid.
The length of time required to investigate is dependent on the complexity of the case, the number and sophistication of individuals involved, the availability of information or evidence, the cooperation or lack thereof of witnesses or the accused and the various legal tools that may need to be employed to gather sufficient evidence to establish a case beyond reasonable doubt. Once a case has been referred by the Agency to the Public Prosecution Service of Canada (PPSC), the PPSC independently reviews the evidence and decides whether or not to lay charges.
The Agency remains engaged with tax administrations around the world on a number of projects and information leaks, notably through the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) and through the Joint Chiefs of Global Tax Enforcement (J5).

Anticipatory based on the Panama Papers fifth anniversary (April 3, 2021)