Tax Evasion: Canada And Harper Government Letting Overseas Cheats Off Easy, Says Senator
OTTAWA - The federal government isn't doing enough to catch tax cheats who stash money in overseas havens, says a Liberal senator.
Percy Downe said the government has the names of more than 100 people who hold million of dollars in Liechtenstein bank accounts, but hasn't cracked down.
However, Nancy Bishay, a spokeswoman for Revenue Minister Gail Shea, said the government has been diligent in chasing tax dodgers.
The Liberal senator from Prince Edward Island said the Canada Revenue Agency managed to recoup only $6 million in taxes and interest from these people last year.
But Bishay says the agency has gone far beyond that in pursuit of cheats.
"Over the last two years, through audits of Canadian taxpayers involved in aggressive international transactions, the CRA has made great strides," she wrote in an email.
"As an example, in 2009-10 alone, we identified over $1 billion in additional taxes. Compare that to 2005-06 under the Liberals where $174 million was identified."
In his news release, Downe said the government seems to be bending the rules to let some tax evaders off the hook.
Downe adds that at a time when the government is scrambling to deal with the deficit, there's no excuse for letting tax cheats off easy through a voluntary disclosure program.
Bishay, though, said the program has worked by encouraging people to come forward with previously unreported income.
Downe said evaders aren't being punished.
"Not one penny has been assessed in fines," he said of the Liechtenstein cases.
"That is because not one charge has been laid. In the four years since this information has come to light, not one of these Canadians who have hidden their money abroad to avoid paying taxes in Canada have stood before a judge, in Canada or overseas."
Downe, a former chief of staff to Jean Chretien who was named to the Senate by his boss in 2003, says it's a matter of fairness.
"Tax fairness, like justice, must be seen to be done," he said. "Honest, law-abiding, taxpaying Canadians should not have to feel let down by a federal government unable or unwilling to make a serious effort to recoup monies from Canadians who try to avoid paying their fair share."
He said wealthy Canadians have billions secreted in offshore tax havens. They should be exposed publicly and brought to account for back taxes, penalties and interest, he argued.
But Bishay said the government is going after these people.
"We expect CRA to focus on aggressive audit efforts to find money that is hiding in offshore accounts and take the steps necessary to ensure Canadian law is respected."
Related on HuffPost:7 New Tax Rules That Could Save You Money
The Children's Arts Tax Credit
This new credit was a budget measure that was designed to address criticism that the earlier Children's Fitness Tax Credit (which is still in effect) unfairly left out parents who paid for programs where the kids had to do more thinking than sweating. It provides a 15 per cent non-refundable federal tax credit on the first $500 spent on your kids' artistic, musical, recreational or cultural development in 2011. That means the tax credit is worth a maximum of $75 per child. Parents of disabled children can claim a 15 per cent tax credit on the first $1,000 of eligible spending, or a maximum of $150. To get the credit, children must be under 16 at the start of the year in which the program is taken (under 18 in the case of disabled children). To qualify, a program must be at least eight consecutive weeks in length, or, in the case of children's camps, at least five consecutive days. Receipts are a must.
The Volunteer Firefighter's Tax Credit
If you performed at least 200 hours of service as a volunteer firefighter in 2011, you can see your tax bill reduced by up to $450 - another new non-refundable tax credit introduced in last year's federal budget. That's the net effect of a 15 per cent tax credit on the $3,000 volunteer firefighters' amount. The 200 hours doesn't have to be entirely spent fighting fires. Attending required meetings and training also qualify. Be aware that there's a big wrinkle in this tax credit for those who get an honorarium for their volunteer efforts. Currently, the first $1,000 of that honorarium is exempt from tax. But if you claim that income exemption, you won't be eligible for the volunteer firefighter's tax credit. No documents need to be filed, but the CRA says it may require claimants to provide certified proof that they actually do qualify.
Family Caregiver Tax Credit
This measure doesn't actually take effect until the 2012 tax year, so you won't benefit from it when filing this year. But people who will eventually benefit can file a new TD1 Personal Tax Credits Return with their employers now to reduce their withholding tax for the remainder of 2012. This credit amounts to an increase of $2,000 in the claim when a taxpayer's dependent is physically or mentally infirm. So the spouse, common-law partner or other eligible dependent claim becomes $12,780 instead of $10,780. Similarly, the claim for a disabled child becomes $4,191 rather than $2,191. The caregiver amount claim for looking after an infirm relative also goes up by $2,000.
Tax-free savings accounts were first unveiled in the 2008 federal budget and have continued to grow in popularity - in part because Canadians can put more money into them each year. If you haven't yet contributed to a "Tiff-sa," the available contribution room rose by $5,000 on Jan. 1, 2012 and now stands at $20,000. TFSA contributions can go into GICs, mutual funds, bonds, stocks or savings accounts and earn profit tax-free, but keep in mind they don't work like a bank account with a maximum balance. When you withdraw funds in one year, TFSA rules don't let you redeposit that amount until the next. In 2009, about 70,000 people withdrew money from one of their TFSA accounts and then redeposited it the same year, so the Canada Revenue Agency levied penalties of one per cent per month on redeposits that were classed as excess contributions. The government eventually relented because of the widespread confusion, and rescinded the penalties in 2010 for people who accidentally put too much into their accounts during the TFSA's debut year. The amnesty is over now, however, and savers can't expect that kind of pity from the tax collector anymore. If you want to move your money from one account or institution to another within the same calendar year, you have to use a formal transfer process that requires filling out forms and, with most banks, paying a fee.
Changes That Affect Students
As of the 2011 tax year, examination fees now qualify for the tuition tax credit. That is, as long as the total fees, including exam fees, amount to at least $100 and the exam is required to obtain professional status or to be licensed or certified in a profession or trade. For students enrolled full-time in a university outside Canada, the minimum length of course that qualifies for tuition, education and textbook tax credits has been lowered from 13 weeks to three weeks. The 2011 budget also loosened the restrictions on transferring investments held in one sibling's Registered Education Savings Plans (RESP) to another sibling's RESP. Under the old rules, transferring RESP investments property from one sibling's plan to another's could trigger a repayment of the Canada Education Savings Grant unless the sibling receiving the transferred investment is under the age of 21. But transfers occurring in 2011 and after will not trigger grant repayments as long as the receiving RESP was set up before the beneficiary turned 21.
Medical Expenses And An RDSP Change
As of 2011, the maximum medical expense claim of $10,000 for a dependant relative (other than for a spouse, common-law partner or a minor child) has been eliminated. Now, there's no limit. The last budget also made a change to the rules governing Registered Disability Savings Plans (RDSPs). Under the old rules, all grants and bonds paid into the plans in the previous 10 years had to be returned to Ottawa if a disability assistance payment was made to an RDSP beneficiary. Now, no repayment is necessary if a doctor certifies that a plan recipient isn't likely to survive for five years
Changes To Federal Tax Brackets And Credits
Most tax brackets and credit amounts were raised in 2011 to account for inflation. In the case of federal tax brackets, they have been raised by 1.4 per cent from 2010's levels. Most of the basic personal amount claims have also been boosted by 1.4 per cent. The 2011 TD 1 tax forms and all of the software and online tax programs reflect the new amounts. Similarly, the thresholds at which some benefits begin to get clawed back (like Old Age Security payments) have been raised by 1.4 per cent. Some refundable tax credits, like the Canada Child Tax Benefit, have also been boosted by 1.4 per cent. Many provinces and territories have also boosted their personal tax credits by indexing factors ranging from 0.8 per cent to 2.0 per cent. But two provinces - Nova Scotia and Prince Edward Island - made no changes in their personal tax credit amounts.