CRA audits of ultra-wealthy Canadians yield zero prosecutions, convictions
Data from the Canada Revenue Agency shows its recent efforts to combat tax evasion by the super-rich have resulted in zero prosecutions or convictions.
In response to a question tabled in Parliament by NDP MP Matthew Green, the CRA said it referred 44 cases on individuals whose net worth topped $50 million to its criminal investigations program since 2015.
Only two of those cases proceeded to federal prosecutors, with no charges laid afterward.
The lack of prosecutions follows more than 6,770 audits of ultra-wealthy Canadians over the past six years.
It also comes amid a roughly 3,000 per cent increase in spending on the agency's high-net-worth compliance program between 2015 and 2019 due to a beefed-up workforce, according to an October report from the parliamentary budget officer.
Green said federal authorities avoid pursuing Canada's biggest tax cheats but go after small business owners who don't pay their taxes under a "two-tiered system" pocked with "loopholes."
"The CRA is not pursuing Canada's largest and most egregious tax cheats. And yet for a small mom-and-pop shop, if you don't pay your taxes long enough -- two or three years -- then they will absolutely go in and garnish your wages because they know you don't have the ability to take it to court," he said.
"There's a tax code for the ultra-wealthy and then there's a tax code for the rest of us," Green said. "The rich are taking advantage of the holes in our tax system. And this Liberal government continues to allow them to do so."
The issue is top of mind for federal lawmakers this week as a parliamentary committee convened Tuesday to discuss the CRA's attempts to combat tax evasion and avoidance.
"The ultra-rich will not be treated with kid gloves. I have no respect for those who cheat the tax system. But I can tell you that if you think that we're going to resolve everything, I think you're naive," National Revenue Minister Diane Lebouthillier told the panel in French, citing the need for international co-operation.
"The super-wealthy are able to pay for super lawyers, super tax specialists. They can do everything to get out of paying their fair share."
Increasingly, those individuals are going to court when audited in order to withhold documents, with about 3,000 "complex" cases now ongoing, the minister said.
"The fact that the cumulative 44 investigations ... have not resulted in convictions within five years is a result of the complexity of the cases and the high legal threshold for securing a criminal conviction in Canada," CRA spokeswoman Pamela Tourigny said in an email.
Members of the House finance committee also passed a motion Tuesday from NDP finance critic Peter Julian calling on the government to launch a public inquiry into tax planning by KPMG in connection with shell companies -- named after ancient swords -- and allegations of investment fraud on the Isle of Man.
The requested investigation follows reports that the British Crown dependency, renowned as a tax haven, may have been linked to alleged fraud that saw millions siphoned offshore and embezzled from Canadian investors.
"KPMG Canada has been very clear that we have no connection whatsoever to the Isle of Man sword companies or the CINAR fraud," spokeswoman Tenille Kennedy said in an email, adding that the company will continue co-operating with the CRA.
Conservative national revenue critic Philip Lawrence said in a statement that "well-connected elites" enjoy exemptions "while everyday Canadians are left further behind," and that Tories stand for tax fairness.
Denis Meunier, former director general of the CRA's criminal investigations directorate, said the dearth of criminal charges is striking. But authorities often lack resources to carry out pricey, painstaking prosecutions across international borders and can opt instead for hefty non-criminal penalties.
"They may have some of the best lawyers fighting, so you may see that more in Tax Court, rather than convictions," Meunier said of proceedings against the ultra-wealthy.
Settlements are much more common than criminal prosecutions, saving investigators time and money, said Kevin Comeau, author of a 2019 C.D. Howe report on money laundering.
"The problem with that is that you don't have on the public record that these persons did not comply with the tax law. And therefore you don't have that public shaming and you don't have that warning to other tax cheats out there," he said.
Tax evasion often boils down to unreported incomes or exaggerated expenses, which can then be deducted from income declared on tax filings.
"It's not atypical to see individuals pay out invoices from foreign consulting companies. You pay a million bucks for a specialized report, and the company is a consulting firm based in a tax haven (where the real, or 'beneficial,' owner is hidden from view) and basically the company is owned by the same guy in Canada whose business it is," Meunier said.
It can be extraordinarily tough to trace money through the warren of shell companies and tax havens used by those seeking to stash their loot.
"They hear you coming. They know CRA is after them," said Comeau."They can just put in a couple more trusts and companies in other jurisdictions to make the trail longer at any time. It's a never-ending rabbit hole."
The Liberal budget in April allotted $2.1 million over two years for the Industry Department to launch a new beneficial ownership registry by 2025. The government has also pledged $606 million over five years starting this year to "improve the criminal investigations program" and crack down on illicit tax schemes, including by super-rich Canadians, Lebouthillier said.
Comeau, a retired lawyer and member of Transparency International Canada's working group on beneficial ownership transparency, said the registry could be a "game changer" for tax avoidance in a country with some of the weakest financial transparency laws among liberal democracies.
"Even if it is legal, they're not paying their fair share. So there's going to be huge social pressure on those persons to unwind those dealings and actually start bringing their money back to Canada," he said.
"Many of these people are very highly respected people in the Canadian establishment."
Tax evasion -- a predicate offence, meaning it forms a component of a more serious crime, such as money laundering -- differs categorically from tax avoidance, a legal means of keeping cash out of tax collectors' hands through clever accounting.
But critics say the vast troves of wealth that remain untouchable to government authorities reveal the need to tighten tax rules as well as hunt down cheats.
"In former times we didn't see tax avoidance as a crime," said Brigitte Unger, professor of economics at Utrecht University whose book, "Combating Fiscal Fraud and Empowering Regulators," was published in March.
"But now we see the public sector needs money, and this is effectively stealing money from public coffers, and should be treated as such."
---------
This report by The Canadian Press was first published June 22, 2021.
IN DEPTH
Budget 2024 prioritizes housing while taxing highest earners, deficit projected at $39.8B
In an effort to level the playing field for young people, in the 2024 federal budget, the government is targeting Canada's highest earners with new taxes in order to help offset billions in new spending to enhance the country's housing supply and social supports.
'One of the greatest': Former prime minister Brian Mulroney commemorated at state funeral
Prominent Canadians, political leaders, and family members remembered former prime minister and Progressive Conservative titan Brian Mulroney as an ambitious and compassionate nation-builder at his state funeral on Saturday.
'Democracy requires constant vigilance' Trudeau testifies at inquiry into foreign election interference in Canada
Prime Minister Justin Trudeau testified Wednesday before the national public inquiry into foreign interference in Canada's electoral processes, following a day of testimony from top cabinet ministers about allegations of meddling in the 2019 and 2021 federal elections. Recap all the prime minister had to say.
As Poilievre sides with Smith on trans restrictions, former Conservative candidate says he's 'playing with fire'
Siding with Alberta Premier Danielle Smith on her proposed restrictions on transgender youth, Conservative Leader Pierre Poilievre confirmed Wednesday that he is against trans and non-binary minors using puberty blockers.
Supports for passengers, farmers, artists: 7 bills from MPs and Senators to watch in 2024
When parliamentarians return to Ottawa in a few weeks to kick off the 2024 sitting, there are a few bills from MPs and senators that will be worth keeping an eye on, from a 'gutted' proposal to offer a carbon tax break to farmers, to an initiative aimed at improving Canada's DNA data bank.
Opinion
opinion Don Martin: Gusher of Liberal spending won't put out the fire in this dumpster
A Hail Mary rehash of the greatest hits from the Trudeau government’s three-week travelling pony-show, the 2024 federal budget takes aim at reversing the party’s popularity plunge in the under-40 set, writes political columnist Don Martin. But will it work before the next election?
opinion Don Martin: The doctor Trudeau dumped has a prescription for better health care
Political columnist Don Martin sat down with former federal health minister Jane Philpott, who's on a crusade to help fix Canada's broken health care system, and who declined to take any shots at the prime minister who dumped her from caucus.
opinion Don Martin: Trudeau's seeking shelter from the housing storm he helped create
While Justin Trudeau's recent housing announcements are generally drawing praise from experts, political columnist Don Martin argues there shouldn’t be any standing ovations for a prime minister who helped caused the problem in the first place.
opinion Don Martin: Poilievre has the field to himself as he races across the country to big crowds
It came to pass on Thursday evening that the confidentially predictable failure of the Official Opposition non-confidence motion went down with 204 Liberal, BQ and NDP nays to 116 Conservative yeas. But forcing Canada into a federal election campaign was never the point.
opinion Don Martin: How a beer break may have doomed the carbon tax hike
When the Liberal government chopped a planned beer excise tax hike to two per cent from 4.5 per cent and froze future increases until after the next election, says political columnist Don Martin, it almost guaranteed a similar carbon tax move in the offing.
CTVNews.ca Top Stories
Canada outlines national action plan to fight auto theft
The federal government is launching what it calls its 'national action plan' to combat auto thefts, which will include stronger penalties for thieves, and increased information sharing between police agencies, government officials and border enforcement.
U.S. Supreme Court rejects appeal from former Guantanamo detainee Omar Khadr
The U.S. Supreme Court on Monday rejected an appeal by a Canadian-born former Guantanamo detainee who was seeking to wipe away his war crimes convictions, including for killing a U.S. soldier in Afghanistan.
What is BORG drinking, and why is it a dangerous trend? An expert explains
If you've been to a party lately and haven't seen someone drinking a BORG, you're likely not partying with college students.
Iran's president and foreign minister die in helicopter crash at moment of high tensions in Mideast
Iranian President Ebrahim Raisi and the country's foreign minister were found dead Monday hours after their helicopter crashed in fog, leaving the Islamic Republic without two key leaders as extraordinary tensions grip the wider Middle East.
Michael Cohen says he stole from Trump's company as defence presses key hush money trial witness
Former Donald Trump attorney Michael Cohen admitted Monday to jurors in the Republican's hush money trial that he stole tens of thousands of dollars from Trump's company as defence lawyers seized on the star witness' misdeeds to attack his credibility.
The world's best airline is paying staff a bonus of 8 months' salary
Singapore Airlines will reward its employees with a bonus worth nearly eight months of salary, a person familiar with the matter told CNN on Friday.
Woman, 35, in critical condition after her truck collided with a Via Rail train near Montreal
A 35-year-old woman is in critical condition after the pick-up truck she was driving was struck by a Via Rail passenger train Monday morning in Quebec's Monteregie region.
Investors watching posts from 'Crypto King' in the wake of fraud, money laundering charges
Former investors of the self-styled “Crypto King” say they are watching his social media accounts and worried his displays of wealth are signs he’s spending their money, even now, as another large expense tied to Aiden Pleterski has triggered a previously unreported lawsuit.
Almost 2 months after it destroyed Baltimore's Key Bridge, the Dali cargo ship has been moved
The cargo ship Dali is being moved from the site of its catastrophic collision with the Francis Scott Key Bridge in a crucial step toward fully reopening the busy Port of Baltimore.
Local Spotlight
VIDEO Born without front legs, this dog has been inspiring the world for 3 years: Dresden farm owner
A sanctuary dedicated to animals with disabilities is celebrating the third birthday of one of its most popular residents.
7-year-old Pokémon prodigy heading to Hawaii for world championship tournament
Catching 'em all with impressive speed, a 7-year-old boy from Windsor, Ont. who only started his competitive Pokémon journey seven months ago has already levelled up to compete at a world championship level.
From DVDs to rehearsals: Halifax theatre company transforms Video Difference building into arts hub
2b Theatre recently moved into the old Video Difference building, seeking to transform it into an artistic hub, meeting space, and temporary housing unit for visiting performers in Halifax.
'Another pair of eyes watching over me:' How a B.C. woman's service dog saved her from drowning
A B.C. woman says her service dog pulled her from a lake moments before she had a seizure, saving her life.
Starbucks fan on decades-long journey to visit every store in the world
A Starbucks fan — whose name is Winter — is visiting Canada on a purposeful journey that began with a random idea at one of the coffee chain's stores in Texas.
'Sacred work': Sask. First Nation learning how to conduct its own underground searches
Members of Piapot First Nation, students from the University of Winnipeg and various other professionals are learning new techniques that will hopefully be used for ground searches of potential unmarked grave sites in the future.
'It could mean a cure': Cautious optimism for groundbreaking ALS research at Western
ALS patient Mathew Brown said he’s hopeful for future ALS patients after news this week of research at Western University of a potential cure for ALS.
B.C. musician's song catches attention of Canucks
When Adam Kirschner wrote 'Slap Shot,' he never imagined the song would be embraced by his favourite team.
'We're on standby': Team ready to help entangled right whale in Gulf of St. Lawrence
A team is ready to help an entangled North Atlantic right whale in the Gulf of St. Lawrence.