Canadian Revenue Agency slapping harsher penalties including jail term to tax dodgers

Internationally, Canada is considered to be soft on white collar crime like tax dodging with few prosecutions and prison sentences measured in months, not years.

But, Panama Papers which was published last year, changed the way Canada looked into tax dodgers and the Liberal government under Prime Minister Justin Trudeau announced a $500 million investment for the CRA to bolster tax enforcement.

Initially, the CRA is targeting a few high-value targets, though according to reports, the agency is investigating 85 Canadian whose names appeared in Panama Papers.

Meanwhile, the number of criminal convictions dropped from 137 in 2011-12 to only 17 in 2016017, but the fines imposed have almost tripled from $46,000 to $123,000 for each offender.

Prison sentences are also up- from an average 18 months in 2011-12 to 26.5 months this year, according to CRA sources.   

“This is a more aggressive CRA,” assistant commissioner of the agency told Toronto Star newspaper in a recent interview adding “there are some actors who should be physically locked up in jail to compel them to discontinue their activities.”

The Panama Papers even ‘spawned’ a new branch in CRA known as the International Large Businesses and Criminal Investigations. It will be manned by 100 specialised auditors who will take up most complex big-ticket cases which have offshore components.

Moreover, to move more quickly from investigation to prosecution, some 230 people have been added to the compliance department, and lawyers have been embedded to investigation department.

According to the assistant commissioner, the Panama Papers allowed the CRA to showcase how the CRA has changed which is a paradigm shift for the agency.

An international evaluation, last year, revealed a lack of transparency in Canada’s financial system especially in corporate ownership which was considered as an impediment to law enforcement.

But, experts say, Canadian enforcement efforts are only a small part of the solution, and the post-Panama Papers world is going to be much more complicated for wealthy individuals who hide their wealth in offshore accounts.

The EU and G20 are set to publish a new black of non-cooperative tax heavens this summer while the OECD’s ‘automatic exchange’ will allow tax auditors in one country to see their citizens are declaring in another. There are 54 participating counties in 2017, and next year Canada will start sharing its tax information along with 46 more countries.