Wealthy 'ghost immigrants' using empty homes to claim citizenship: tax expert
Published Monday, January 29, 2018 10:58AM EST Last Updated Tuesday, January 30, 2018 7:42AM EST
Some foreign investors, particularly those from China, are taking advantage of Canadian loopholes to become ghost immigrants, according to David Lesperance, a tax and immigration consultant with Lesperance & Associates.
Lesperance cites one recent judge’s decision from a lawsuit in which the judge said Chinese millionaire Guoqing Fu bought multiple multi-million-dollar homes in Canada while claiming just $97 in worldwide income on his taxes. The judge’s 600-page ruling in the case was posted online earlier this month.
“That was really pushing the edge,” Lesperance told CTV’s Your Morning on Monday. He says the situation would have gone unnoticed if Fu’s family and his partners, the Xia family, had not turned on each other and exposed their activities in court.
"These were two parties...who fell out and decided to sue each other in civil court,” Lesperance said.
The judge’s ruling from the case indicates Fu “had a large and successful business in China,” yet he only claimed “a miniscule worldwide income of $97.11” on his Canadian income tax return, despite spending millions on three different homes. “This was an incredible assertion given the fact he owns one of the top 10 textile manufacturing and distribution companies, based in one of the biggest textile manufacturing centres of China,” the judge’s decision said.
Lesperance says wealthy foreigners are using these tactics to game the Canadian system because no one is investigating to verify that they’re actually physically living in Canada. He says the Canadian immigration system isn’t really looking at these people, and that the Canada Revenue Agency isn’t focused on them because it lacks the resources to do so.
A spokesperson for the CRA said it works with provincial and municipal governments to enforce local tax and principal residency laws.
“The government… is actively engaged in monitoring and addressing the overall health and stability of the housing market and financial system in Canada,” a spokesperson for the CRA told CTVNews.ca in a statement.
The CRA says it recovered $117.9 million by conducting 4,471 audits from April 2015 to September 2017 in B.C. It also recovered $331.2 million through 21,280 audits conducted over that same period in Ontario. The highest penalty was almost $2.5 million, according to the agency’s website.
“It is important to note that the mandate of the CRA is to administer the tax legislation provided by the Department of Finance,” the CRA spokesperson said, adding that issues of immigration fall under the mandate of Immigration, Refugees and Citizenship Canada.
An IRCC spokesperson said the department is continually working to improve its systems to detect fraud.
“The government of Canada takes any kind of citizenship or immigration fraud seriously,” a spokesperson told CTVNews.ca in a statement. The spokesperson added that the IRCC works with the RCMP and the Canada Border Services agency to enforce the Immigration and Refugee Protection Act and its regulations, “including allegations of fraud.”
The IRCC points out that the CBSA is responsible for investigating suspected immigration fraud.
The CBSA has set up a hotline for reporting immigration or citizenship fraud.
Lesperance suggests foreign buyers are pulling off these schemes in Toronto, Vancouver and Montreal, where their homes are sitting empty despite high demand for housing in the area.
“While they are getting the benefits of Canadian permanent residence and citizenship, they are, like this gentleman, not contributing to the tax base,” Lesperance said. “They’re driving up house prices, they are denuding neighbourhoods of vibrancy and customers for local restaurants and businesses, and they’re not contributing to the tax base.”
Canada’s hottest markets have taken steps to curb this practice recently, by imposing foreign buyer taxes, as well as taxes on homes that sit vacant. Numbers released by Ontario in December show foreign home buying was down due to higher taxes in the latter part of the year.
Lesperance suggests the solution is for Revenue Canada to start cracking down on these individuals by auditing them – a process that is much easier to do now than it was 20 years ago because of social media and the internet.
“If they do that they will send a shock through this community,” he said. He suggests a wave of audits would force these investors to decide between paying their taxes in Canada or abandoning their pursuit of citizenship altogether.
Lesperance says this has been going on at least since the 1990s, when someone informed him about it by handing him what he calls a “scoundrel’s guide to circumventing the Immigration and Citizenship Act.”
Lesperance says the tactic is not isolated to one particular group.
“It’s not endemic to one particular group of immigrants,” Lesperance said. “It’s just endemic to immigrants who look at the situation and say, ‘It’s easy to cheat, I get all the benefits, the costs are low and they’re not chasing me.’
“And at the end of the day, you get citizenship.”