CRA Increasing Global Enforcement

We live in a world of rootless capital, where finance flows readily across borders. Many businesses operate internationally with resulting assets held in multiple jurisdictions.

These intricate, globe-straddling financial portfolios have been the bane of tax authorities, tasked with monitoring and enforcing tax liabilities on assets held abroad. Blind spots – jurisdictions that the authorities can’t access for lack of information sharing agreements – were previously widespread, spurring tax evasion by those who concluded that the Canada Revenue Agency (“CRA”) lacked enforcement capacity. 

The CRA of today has reworked its practices in an attempt to respond to a globalized world. Canadian tax authorities are striving to gain insight about financial activities in foreign jurisdictions.

Specifically, the CRA is attempting to increase enforcement and compliance by working with Canadian banks and international partners to close information gaps. New strategies include

  • Accessing international Electronic Funds Transfers (EFTs). Since 2015, the CRA has had access to all EFTs over $10,000 entering or leaving Canada. As of March 2018, some 187,000 EFTs worth $177 billion were analyzed by CRA officials, with particular attention paid to high-risk jurisdictions. The data is being used to catch tax evaders and create better models and practices for targeting individuals and corporations in the future.
  • Accessing offshore banking information. The Canadian government’s pledge to the OECD and Global Forum on Transparency and Exchange of Information for Tax Purposes to adopt the Common Reporting Standard (CRS) has helped bring the country in-line with global standards. After adopting CRS as standard procedure, the CRA gained access to banking information from over 100 other countries, shedding light on the overseas assets of tens of thousands of Canadian individuals and corporations.
  • Collaborating with other countries to combat global tax evasion and money laundering. Canada participates in the OECD’s Forum on Tax Administration (FTA) and the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC). Both forums allow tax authorities to share information and best practices, and to identify and target cross-border tax evasion schemes.
  • Collaborating on cross-border criminal investigations. Canada belongs to the Joint Chiefs of Global Tax Enforcement (J5) group, along with Australia, the Netherlands, the UK, and the United Kingdom. The goal of the J5 is to share intelligence and conduct joint operations on the individuals participating in international tax crimes and money laundering, and those promoting the schemes.
  • Collaborating with global efforts to promote disclosures from multinational corporations. In a relatively new program, the CRA has been participating in the Country-by-Country Reporting program, which has been tracking the revenue and profit information of large multinational enterprises across various international jurisdictions since 2018.

In the globalized era, capital can zig-zag across international jurisdictions and remain largely invisible to tax authorities focused on their own jurisdiction. Tax authorities like the CRA are now attempting to change this. While change may come slowly, we are seeing a new era of international tax enforcement beginning to emerge.

Nick Wright is a Toronto business lawyer. Contact him to discuss your business’ legal needs.

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