Snitches will get commissions of as much as 15 per cent if they can help the Canada Revenue Agency (CRA) bust large international tax-evasion cases and recoup unpaid funds.
The new reward system, laid out in Ottawa’s 2013 budget with further details expected in the coming months, will bring Canada in line with major countries such as the United States, Germany and the United Kingdom. Last year, the Internal Revenue Service paid a reward of $104-million (U.S.) to a former UBS banker after collecting $5-billion in back taxes from Swiss banks.
“What we’re after are people hiding their money offshore and avoiding Canadian taxes by hiding their money outside of our country,” Finance Minister Jim Flaherty said in a news conference on Thursday. “Yes, CRA will pay for someone to provide information on people who are hiding their money outside of Canada.”
The new whistle-blowing rules are a key component of a plan to provide more powers to the CRA, which will also gain the ability to track all international financial transfers above $10,000 in 2015.
However, the NDP and the Liberal Party raised questions about a new round of cutbacks at the CRA. The agency is getting $3-million a year to track the electronic transfers and another $10-million a year to crack down on fraud in its research and development tax credit program, but spending in administrative services at the agency will be slashed by $60-million a year in addition to previous cutbacks. Federal officials said the spending cuts will not affect auditors or other front-line services, adding that the agency is expected to collect an extra $550-million in revenue per year.
The government has laid out a series of conditions before it pays out money to whistle-blowers. The 15-per-cent reward will apply only to tax assessments or reassessments on international transactions over $100,000. In addition, Ottawa will not enter into deals with whistle-blowers who have been convicted in relation to the tax evasion they are flagging.
“We’re not looking for rogues turning in other rogues,” Mr. Flaherty said.
The new measures are part of a program called Stop International Tax Evasion, designed to ensure that all taxpayers contribute their fair share to government coffers.
“We are introducing new measures to crack down on tax evasion and aggressive tax avoidance to keep taxes low for Canadian families, who work hard, play by the rules and pay their taxes,” Mr. Flaherty said in his budget speech Thursday.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) currently collects information on all transfers above $10,000 as part of the fight against money laundering and terrorism financing, but the new rules will ensure that the CRA also receives information on international transfers.
In addition, Canadians with large assets abroad will have to provide more detailed information to the CRA in upcoming tax filings as the government beefs up its foreign-income disclosure requirements. In the short term, the government hopes its moves will persuade more Canadians to disclose any money they’ve stashed abroad for fear the new requirements will soon help the CRA catch more tax cheats.