Panama Papers: Probe of Canadian tax cheats could lead to jail time
More than a year after the historic leak of tax haven documents, the CRA has launched dozens of criminal investigations.
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The Canada Revenue Agency’s probe into tax cheats named in the Panama Papers has taken a criminal turn.
More than a year after the historic leak of tax haven documents, the federal agency is now auditing 122 Canadians who appear in the database and has launched dozens of criminal investigations, details of which will be made available in a status report to be tabled in the House of Commons on Tuesday.
“When the severity of the crime permits fraud charges under the Criminal Code — which allow for longer sentences — we go there,” said the CRA’s assistant commissioner Ted Gallivan, who described the official update on the CRA’s Panama Papers investigation to Torstar News Service.
It’s the strongest signal yet that Canadians named in the Panama Papers could end up behind bars.
The database, which was leaked to the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists, led to hundreds of investigative reports by media partners around the world, including Torstar and CBC/Radio-Canada. After the initial flurry of news led to the resignation of Iceland’s prime minister, criminal probes have been brewing in dozens of countries.
In Canada, the revelations were greeted with a nearly half-billion-dollar investment in the CRA and a mandate to expand offshore investigations.
But what’s pushed the CRA to go beyond attempting to recoup unpaid tax and pursue jail time is a new-found focus on the enablers: the accountants and lawyers who set up offshore tax evasion schemes and sell them to clients.
“The agency has been directed by the minister to up our game,” Gallivan said.
“The criminal investigations are progressing, particularly on facilitators who had 30 or 40 clients. The priority remains facilitators who had dozens of taxpayers participating.”
The criminal cases are in various stages, ranging from preliminary to full-bore, and Gallivan declined to say exactly how many there were.
“There are several, but we don’t yet have enough that are mature, so we’re not comfortable communicating a firm number publicly yet,” he said.
The CRA’s update to Parliament shows significant progress since last fall, when 60 Canadians in the leak were being audited and only a handful of search warrants had been executed.
Experts lauded the progress, saying the effort appears to be far more significant than the small number of offshore prosecutions pursued by the CRA in the past.
“Those numbers look good,” said Denis Meunier, a former enforcement official with the CRA and Fintrac, Ottawa’s anti-money-laundering watchdog. “But you don’t want to declare victory yet.”
Meunier was especially heartened by the focus on the facilitators of tax evasion.
“It’s a good strategy: you go after the cancer. Those guys — the professional schemers — they’re the cancerous part of the industry because what they do spreads,” said Meunier, a member of Transparency International Canada.
“Criminal prosecutions get the industry worried — people start to worry about their reputation. That’s what deterrence is all about.”
Richard Leblanc, a corporate governance expert at York University, said the approach was “completely appropriate,” because “accountants and lawyers are the gatekeepers that make the transactions happen.”
“One thing is for certain: the investigation of accountants and lawyers by the CRA will cause chills right down Bay Street,” said Leblanc, who also lectures at Harvard University. “Canada has been far too soft on professional advisers who knowingly skate over the line into tax evasion.”
Days after the Panama Papers investigation made worldwide headlines in April 2016, the CRA pledged to set up a program to focus on the professional promoters of tax evasion. In its first year of operation, the centre successfully laid $44 million in penalties on accountants and lawyers who promote tax plans.
“Getting the identity of the person who promoted it is also a way for us to then work backward to all the other participants,” said Gallivan.
Also aiding the effort to combat offshore tax evasion is a new spirit of co-operation among countries, who have traditionally regarded their tax information as secret. Under the banner of the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), the CRA has been able to share information with 38 other tax authorities.
“The media did us all a service when they focused on the Panama Papers, because it’s now a priority for all 38 countries at the same time,” said Gallivan.
“We’ve always had international co-operation, but we’ve often had different priorities. So the information exchange that we’re enjoying now, with those JITSIC countries, is all focused around people and entities linked to the Panama Papers.”
While it could take years for the audits to produce results and cases to come to court, Gallivan says offshore tax avoidance has become a priority at the CRA.
Enforcement actions against multinational corporations alone brought in $13 billion in 2016-17, up 38 per cent over the previous year. But Gallivan says “there’s more to do.”
“There are billions more out there and we want to find it.”