Canada Revenue Agency Under Fire In Tax Evasion Controversy

The Canada Revenue Agency has found itself the focus of controversy following revelations that hundreds of prominent Canadian individuals and corporations are hiding millions of dollars in offshore accounts to avoid paying taxes.

The “Paradise Papers,” a massive leak of private financial documents to media outlets over the weekend, showed that Canadian organizations ranging from the Loblaw’s grocery chain to the Montreal Canadians hockey team, as well as former Prime Ministers Brian Mulroney, Jean Chretien and Paul Martin have overseas accounts where they hide millions of dollars to avoid paying Canadian taxes.

The current Liberal Government of Prime Minister Justin Trudeau faced a barrage of criticism in Parliament on Monday after it was revealed that Montreal-based businessman Stephen Bronfman, who is a prominent fundraiser for both the Liberal Party of Canada and Prime Minister Trudeau, also holds large sums of money in offshore accounts.

The Liberals seem content to place the focus of this controversy at the door step of CRA, ordering the agency to review their policies related to offshore accounts and any links between Mr. Bronfman and trusts in the Caribbean. The Liberals even referred media inquiries about the scandal to CRA for comment.

The Canada Revenue Agency said it “is reviewing links to Canadian entities and will take appropriate action in regards to the Paradise Papers.” In a statement on Monday, Mr. Bronfman said he has “always fully complied with all legal requirements, including with respect to taxes.”

To be sure, it is not illegal for Canadian individuals or companies to place assets in overseas accounts. But the political optics are bad for a government that swept into office in 2015 on a promise of “tax fairness” and a pledge to make sure that everyone “pays their fair share” of taxes.

On Tuesday, The Toronto Star reported that the CRA has been reluctant over the past six years to disclose information on the difference between taxes due and those actually collected, which is known as the “tax gap.” The Star article noted that other major industrialized countries such as the United States and the United Kingdom publicly disclose the tax gap each year, but Canada has not followed suit.
Still, Prime Minister Trudeau’s government has taken some steps to crack down on tax evasion. In its most recent March budget, the federal government allocated $523.9 million over five years to strengthen tax enforcement, while projecting an additional $2.5 billion in revenue from the efforts. The CRA has more than 990 audits and more than 42 criminal investigations related to offshore accounts under way, according to a statement issued by the agency.