Clients of UBS AG, Switzerland's largest bank, have led a five-fold surge in the number of Canadian residents reporting hidden offshore income over the past eight years.
Almost 6,000 taxpayers came forward in the past 12 months as part of the Canada Revenue Agency's voluntary disclosure program to report hidden assets, up from 1,200 in 2006. UBS has more of these clients than any other bank, with about 800 customers reporting hidden assets worth about $218-million (Canadian), said Philippe Brideau, a spokesman for the country's national tax collector.
UBS customers account for about 10 per cent of the $2-billion of offshore income reported in Canada since 2006, the data in an e-mail from the Ottawa-based agency shows. That tops other institutions including Credit Suisse Group AG and HSBC Holdings Plc, Brideau said.
The surge in disclosure comes as Canada steps up efforts to match the U.S. regulators' crackdown on tax cheats who take advantage of bank secrecy laws in tax havens. Credit Suisse, Switzerland's second-largest bank, agreed in May to pay $2.6-billion in penalties and pleaded guilty to helping Americans cheat on taxes, the first global bank in a decade to plead guilty in a U.S. court.
Whistle-blower Hotline The Revenue Agency established a telephone hotline for informants this year, offering rewards of up to 15 per cent of federal tax collected related to tips on offshore tax evasion for amounts of at least C$100,000. It received C$30-million last year to bolster reporting on electronic funds transfers and created a 70-person, offshore compliance team to focus on data analysis and auditing of such accounts.
The agency still has a lot to do to catch up with tax cheats, the Auditor-General of Canada said in a November report.
"The agency has introduced some new audit procedures but is not quite prepared for this new line of work," the auditor– general said then.
The tax agency learned of offshore accounts in 2007 from an informant who leaked Canadian client information about LGT Bank in Liechtenstein, according to the auditor-general's report. That list contained the names of 182 individuals with accounts at LGT whom the government then targeted for prosecution, the auditor-general said.
French Ruling Credit Suisse, Switzerland's second-largest bank, accounts for 217 Canadian disclosures over the past five years with unreported income of more than C$35-million, Brideau said. The CRA received 233 disclosures related to HSBC with unreported income of C$115-million, he said.
Karina Byrne, a spokeswoman for UBS, Calvin Mitchell, a spokesman for Zurich-based Credit Suisse, and Sharon Wilks, a spokeswoman for HSBC, all declined to comment.
UBS avoided U.S. prosecution in 2009 by acknowledging it aided tax evasion, paying $780-million and handing over data on 250 accounts. It later disclosed information on more than 4,440 other accounts.
Prosecutors in France and Belgium are investigating allegations UBS helped wealthy Belgians and French hide money in Swiss accounts. A Paris appeals court will decide on Sept. 22 whether UBS must post a €1.1-billion euro ($1.4-billion U.S.) bond to cover a potential criminal penalty for alleged money laundering in an investigation there.
'Tremendous Return' Canadian Prime Minister Stephen Harper's government should commit more resources to the revenue agency if it's going to match efforts abroad, said Percy Downe, a senator with Canada's opposition Liberal Party. Only half of the $30-million (Canadian) committed to the agency by Harper is new funds, with the other half reallocated from elsewhere, he said.
"So they rob Peter to pay Paul in a program that they know they're getting a tremendous return," Downe, who sits on the Senate standing committee on internal economy, budgets and administration, said in a telephone interview. "Why isn't the minister of finance allowing more money into that department. What would $100-million do?"
Rebecca Rogers, a spokeswoman for Minister of National Revenue Kerry-Lynne Findlay, said the number of the agency's auditors has climbed 14 per cent to 6,042 since 2006, when the Liberals were in power.
"The dramatic increase in voluntary disclosures is proof our government's investments in combating tax evasion and aggressive tax avoidance are working," Rogers said in an e-mail.