( 199 Votes )
Tax lawyer Paul DioGuardi warns that the scope and specificity of the personal and account information leaked to the worldwide media this week by the International Consortium of Investigative Journalists in Washington, DC has exposed Canadians with legitimate offshore trusts and corporations to the scrutiny of the Canada Revenue Agency, and even international revenue watchdogs.
“The immediate response from governments and tax authorities will be to protect themselves from public outcry,” Mr. DioGuardi cautions. “Canada’s Ministers of Revenue have long been under fire for perceived lack of initiative in tracking down and prosecuting offshore tax evaders.
Paul DioGuardi answers questions
live on CBC Radio One program
April 25, 2013
Missed the show? Listen here.
The media frenzy surrounding this massive database leak may shame the current Minister into calling for heads. The easiest targets are the birds in hand. Any of the 450 Canadians named in this database leak – many of whom have legitimate offshore trusts and accounts, and may already be reporting those accounts - could easily find themselves under investigation by the CRA.”
Mr. DioGuardi recalls the 2010 leak of UBS account holders. Hundreds of Canadians with secret Swiss bank accounts were named on that list. Keith Ashfield, then the Minister of National Revenue, angrily defended his government against journalist Diane Francis’s accusation that Canada was soft on tax cheats by advising that the CRA was analyzing those accounts, and that the Prime Minister was committed to pursue any tax avoiders discovered “with the full extent of the law”.
The Canada Revenue Agency reports 44 convictions have been achieved. Yet none have been published on the Convictions sections of the CRA website, so it is unclear if there have been any prosecutions or convictions of Canadians with money in the identified UBS accounts. “This time,” Mr. DioGuardi suggests, “the Prime Minister may be pressured by public outcry to make good on his words and order investigations that end up in criminal court. This puts any Canadian whose name is on this new leaked database leaked at risk of invasive and dangerous investigation.”
Mr. DioGuardi, a senior lawyer and Q.C., who has practiced in the area of tax law and tax compliance issues for 47 years, has further warnings for Canadians identified in the database, especially those who may not be declaring the money hidden offshore.
“The Canada Revenue Agency’s Voluntary Disclosure program is not adequate protection against the potential of such a witch hunt. If accepted, a VDP offers protection against prosecution for tax evasion. But before a disclosure is accepted, the CRA can – and often does - audit everything in your financial records. If you hold back anything, the disclosure can be disqualified. At which point the CRA is already in possession of enough information to launch a criminal investigation and then prosecute. Moreover, the CRA could decide that the disclosure is not voluntary because they were already aware of your tax evasion simply by virtue of the presence of your name in this database.”
Mr. DioGuardi recommends that any Canadian who believes their names and account details are in the leaked database should, as a cautionary measure, consult with legal counsel to secure the protection of solicitor-client privilege. “Such protection can help shield you from investigation, or at the very least limit the scope of any investigation. In a situation as volatile and as highly publicized as this, both the honest taxpayer and the Canadian who’s been hiding something offshore can be victimized. Especially now that the Canadian government has agreed to reward whistleblowers for information about offshore tax evaders. When greedy vigilantes get involved, you can’t trust your employees, your financial advisors, or in some cases even your own family.”
As for the whistleblowers, DioGuardi suggests they, too, might seek the protection of legal counsel. “The Minister of Finance has advised he will pay a reward for ‘good clean information’ that leads to the recovery of tax revenues. But in verifying the caliber of the lead, the investigation might also delve into the whistleblower’s financial affairs. And an audit is always an audit. It’s not something you should engage in unprotected.”
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