Canada Launches Anti-Evasion Electronic Funds Transfer Initiative
New Electronic Funds Transfer (EFT) rules have entered into force in Canada, requiring certain financial intermediaries to report incoming and outgoing transfers of CAD10,000 (USD8,446) or more to the Canada Revenue Agency.
On January 7, 2015, Revenue Minister Kerry-Lynne D. Findlay announced the launch of the CRA’s EFT initiative. Effective January 1, 2015, the new reporting requirements are designed to allow the CRA to better identify higher risk taxpayers and filers. In turn, the Agency should be able to effectively identify taxpayers who participate in aggressive international tax avoidance and attempt to conceal income and assets offshore.
The CRA’s EFT requirements are the same as those for reports currently provided to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Financial intermediaries will therefore submit one report to both FINTRAC and the CRA, at the same time.
EFTs must be filed no later than five working days after the transfer occurred. Information that must be reported includes that relating to the transmission of instructions for a transfer of funds through any electronic, magnetic, or optical device, telephone instrument or computer, made at the request of a client.
The following financial intermediaries are required to submit EFT reports: financial entities (i.e. banks, credit unions, caisses populaires, financial service cooperatives, trust and loan companies, and crown corporations that accept deposits); money service businesses; and casinos.
The CRA will safeguard the information collected. The data will only be used for the purposes for which it is collected, be subject to strict security protocols, and held in a segregated database.
Findlay said: “Our Government is committed to protecting the revenue base by ensuring that all Canadians meet their tax obligations. Announced in Economic Action Plan 2013, these new measures will help crack down on international tax evasion and aggressive tax avoidance and ensure our system remains fair for all Canadians. These new tools will combat offshore tax non-compliance and improve the integrity of the tax system.”
Between April, 2006 and March 31, 2014, the CRA convicted 62 individuals for tax evasion. These cases involved CAD20m in evaded federal taxes, and resulted in court fines of approximately CAD12m and 701 months of jail time. Use of the CRA’s Voluntary Disclosure Program (VDP) is at a record high, with VDP disclosures in 2013-14 up 42 percent on the previous year. These disclosures have enabled the CRA to identify more than CAD300m in previously unreported income.
