CRA's pursuit of Panama Papers tips likely to take years

The Panama Papers have uncovered some 350 Canadians using tax havens who have attracted the attention of Revenue Canada. But full audits are likely years away, given previous experience, as the agency struggles to ramp up staffing and faces legal challenges from the wealthy.

Revenue Minister Lebouthiller promises Panama Papers followup, but previous tax-haven audits slow

Dean Beeby · CBC News · Posted: Apr 05, 2016 4:59 PM EDT | Last Updated: April 6, 2016

Ugland House on Grand Cayman Island is the registered office of some 18,000 companies. Caribbean and Atlantic offshore finance centres are at the heart of the Panama Papers investigation. The CRA says it's committed to combating the abuse of offshore jurisdictions but critics question whether it has the resources. (Reuters)

Canada Revenue Agency officials are "actively pursuing" the leaked Panama Papers with the names of some 350 Canadians who may have stashed cash overseas — but completed audits are likely years away, fraught with legal hurdles and delay tactics by the wealthy.

Revenue Minister Diane Lebouthillier "has instructed CRA officials to obtain the list of data leaked through Panama Papers in order to cross-reference this information with data already being obtained through the agency's existing mechanisms," said a statement to CBC News.

The trove of 11.5 million documents emerging from a law firm in Panama was given to a German newspaper by an unidentified person, covering four decades of offshore holding companies.

The massive data dump was then shared with more than 100 media outlets through the International Consortium of Investigative Journalists, including the CBC in Canada, so that reporters could verify and cross-reference the contents.

"We have not received any formal request from the CRA regarding this matter," CBC spokesman Chuck Thompson said in an email Tuesday. "As a matter of journalistic principle, CBC News does not reveal sources nor related background information."

National revenue minister Diane Lebouthillier has instructed her staff to get a copy of the Panama Papers to begin cross-referencing the data. (Marika Wheeler/CBC )

The Panama Papers is one of the largest such financial leaks to date, and led to the resignation Tuesday of Iceland's prime minister, who was named on the list. Other global tax-haven lists emerged in 2007, 2010 and 2013, and the CRA has struggled to wade through all the data.

The auditor general of Canada found the agency took six years to process files that an informant provided in 2007, listing 182 Canadians with accounts at a bank in Liechtenstein. Spotty information meant only 46 audits could be completed, reaping about $25 million in taxes, penalties and interest.

Spotty information

The French government handed over another list in 2010, with details of 1,000 accounts at HSBC Private Bank (Swiss) SA, linked to Canadian taxpayers. Another dump of data through the ICIJ in 2013, also obtained by CBC, contained 2.5 million files — including about 450 Canadian names linked to tax havens.

The CRA "is not prepared for the growing workload in this area," auditor general Michael Ferguson warned in 2013. He noted that some delays in processing the Liechtenstein data were for lack of audit staff, while others were the result of legal manoeuvres by well-heeled investors.

A previous revenue minister, Gail Shea, attempted without success to obtain the 2013 list from CBC, suggesting she would pursue legal options.

"We were not involved in any kind of legal proceeding with the CRA regarding the data that was released in 2013," Thompson said.

The laws have to be tightened up.- Dennis Howlett, Canadians for Tax Fairness

Since then, the ICIJ has posted much of the material online in a searchable database, though with some information still withheld.

The March 22 federal budget promised spending of $444 million over the next five years "to crack down on tax evasion and combat tax avoidance." Dennis Howlett, the head of Canadians for Tax Fairness, questions whether an agency subject to significant downsizing in recent years can gear up quickly enough for a fresh tax-haven initiative.

Howlett also said Justice Canada needs to step into the fray, but has itself been downsized by the previous government. "The laws have to be tightened up," he said.

CBC News reported last month that the CRA offered amnesty to multi-millionaire clients caught using what's been called an offshore tax "sham" on the Isle of Man.

Controversial scheme

The amnesty allows for "high net worth" clients of the accounting giant KPMG to be free from any future civil or criminal prosecution — as well as any penalties or fines — for their involvement in the controversial scheme.

The clients simply had to agree to pay their back taxes and modest interest on these offshore investments, which they had failed to report on their income tax returns. Critics have demanded a public inquiry.

And this week, the Parliamentary Budget Office said the CRA has continued to stall on a request for tax data so that Canada's "tax gap" can be calculated.

The office has been asking for the information since at least 2013, so that it can estimate the actual amount of tax due from various sources, such as GST and offshore tax schemes, versus the amount that the CRA actually collects.

Iceland's Prime Minister Sigmundur David Gunnlaugsson resigned Tuesday in connection with revelations in the Panama Papers.

The Liberal 2015 election platform indicated the data would be turned over, but the new government has not done so after more than five months in office.

The CRA established a tip line in January 2014 offering rewards for providing information on major international tax non-compliance. Officials said they are reviewing 120 cases as a result, but payout of any rewards is still a long way off as files are slowly resolved.

Beginning in January last year, financial institutions have been required to report international fund transfers over $10,000, information the CRA says could help expose tax havens.

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