Published: March 12, 2020
Last Updated: October 1, 2021
CRA now Pays Whistleblowers
The 2013 Federal Budget introduced the “Stop International Tax Evasion Program” (“SITEP”) which has been renamed the Offshore Tax Informant Program (OTIP). OTIP allows informants to disclose information regarding tax evasion to CRA in exchange for payment.
Voluntary Disclosure can Protect against OTIP
Canada Revenue Agency’s (“CRA”) Voluntary Disclosures Program (“VDP”) provides Canadians the opportunity to disclose and correct their past failures to meet their tax-filing and remittance obligations. For example, a taxpayer with unreported foreign income, investments or other property can disclose this to CRA under the VDP and, if accepted, will be provided relief from financial penalties, prosecution and will usually receive a reduction in the interest accrued on the tax owing.
The VDP is clearly a benefit to taxpayers and the government. Taxpayers can avoid substantial penalties by “turning themselves in” and the government expends relatively little resources in tracking down respective tax evaders.
Conditions to Collect from OTIP
The significance of the VDP has been increased due to OTIP. OTIP targets high income tax evaders holding undisclosed foreign property. The information disclosed must lead CRA to the recovery of over $100,000 in tax owing. Additionally, an informant will only receive payment under the following conditions:
- All objection and appeal rights associated with the assessed tax have expired
- The federal tax, for which a payment is being issued, has been collected
- The information is not related to tax evasion for which the individual has been convicted.
The payment received will be considered taxable income to the informant and will be in the range of 5 to 15 percent of the tax recovered.
OTIP is distinct from the already established “Informant Leads Program” (“ILP”), which facilitates the reporting of tax evasion to CRA. CRA does not provide payment to informants under the ILP.
If you are holding income or other property offshore that should be reported to CRA it may not be in your best interest to assume that foreign privacy guarantees will protect you. As is evident from recent news reports, the legislative privacy protections that holders of offshore accounts rely on are not fail-safe. In fact, those protections appear to be no match for an employee with access to confidential information and basic technical know-how.
Recently a consortium of investigative journalists was provided with 2.5 million files related to offshore accounts and unreported income, including those of Canadians. The tax savings realized by moving income offshore will be negated by the applicable penalties and interest and probable prosecution.
As international and Canadian tax avoidance and evasion prevention programs become more robust it really is important to proceed with a Voluntary Disclosure before CRA begins an investigation.
Canadian Income Tax Lawyer Assistance
You must meet your tax reporting and remittance obligations to CRA under the VDP and before they contact you. By doing so you will avoid financial penalties and prosecution and the accrued interest on the tax owing will generally be lowered. For assistance with your Voluntary Disclosure or any other tax matter please contact our experienced Vancouver income tax lawyers. Our tax law firm has also assisted Canadians who wish to submit a tip to CRA to claim an aware under the OTIP.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."