Published: March 3, 2020
Last Updated: July 19, 2021
CRA Paid Offshore Tip Program – Toronto Tax Lawyer Comments
The 2013 Federal Budget introduced the “Stop International Tax Evasion Program” (“SITEP”) that was renamed to the Offshore Tax Informant Program (OTIP). SITEP or OTIP allows informants to disclose information regarding income tax evasion to CRA in exchange for payment. This article provides a Toronto tax lawyer analysis of the program and tax help and suggestions for Canadian taxpayers who may have unreported offshore income or unreported offshore assets and wish to avoid tax evasion prosecution and tax penalties.
Canada Revenue Agency’s (“CRA”) Voluntary Disclosures Program (“VDP”)
Canada Revenue Agency’s (“CRA”) Voluntary Disclosures Program (“VDP”) provides Canadian taxpayers 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, tax evasion 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.
Details of Offshore Tax Informant Program (OTIP)
The significance of the VDP has been increased due to SITEP or OTIP. Offshore Tax Informant Program targets high income tax evaders holding undisclosed foreign property or unreported foreign income. 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, including the massive Panama Papers disclosure and searchable data base, which has been commented on in the media including a CTV interview by our Toronto tax law firm, 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.
Also in 2013 a the International Consortium of Investigative Journalists which orchestrated the Panama Papers disclosure 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 tax evasion prevention programs become more robust it really is important to proceed with a Voluntary Disclosure before CRA begins an investigation.
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 Canadian tax lawyers.
"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."