Canadian Government Combats International Tax Evasion by Joining Forces With International Tax Jurisdictions

The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P, Minister of National Revenue, today signed the international Multilateral Competent Authority Agreement (MCAA), an important step towards implementing the Common Reporting Standard for the automatic exchange of financial account information with other tax jurisdictions.

Economic Action Plan (EAP) 2015 reiterated the Government of Canada’s pledge to working with international partners to address international tax evasion and improve tax compliance, including a proposal to adopt the Organisation for Economic Co-operation and Development (OECD) Common Reporting Standard starting on July 1, 2017, with the first exchanges of financial account information beginning in 2018. Canada is one of more than 90 jurisdictions that have to date committed to implementing the Common Reporting Standard. As of May 2015, a number of jurisdictions, including Germany, the United Kingdom, and France have signed the MCAA.

By signing the MCAA, Canada will benefit from a coordinated arrangement to exchange financial account information efficiently and securely with other tax jurisdictions. This information will improve the Canada Revenue Agency’s (CRA) ability to detect and address cases of tax evasion and to protect the integrity of Canada’s tax system.

In recent years, the Government of Canada has introduced over 90 measures to close tax loopholes, clarify tax rules, reduce aggressive international tax avoidance, and improve the integrity of the tax system. In addition, EAP 2015 proposed an investment of $25.3 million over five years for the CRA to improve its offshore tax evasion risk assessment systems and business intelligence and to hire additional auditors.

Quick Facts

— The Common Reporting Standard was developed by the OECD as the new
global standard for exchange of information to better fight tax evasion
and improve tax compliance. The standard was approved by the OECD in
July 2014 and is endorsed by the G-20 and by the Global Forum on
Transparency and Exchange of Information for Tax Purposes.
— G-20 Finance Ministers committed in February 2015 to work towards
completing the necessary legislative procedures to implement the common
reporting standard. Canada committed to implementing the Common
Reporting Standard by 2017, with the first exchange of information
occurring in 2018.
— Under the new standard, foreign tax authorities will provide information
to the CRA relating to financial accounts in their jurisdictions held by
Canadian residents. The CRA will, on a reciprocal basis, provide
corresponding information to the foreign tax authorities on accounts in
Canada held by residents of their jurisdictions. In order for the CRA to
obtain the information to be exchanged, the Common Reporting Standard
will require financial institutions in Canada to identify accounts held
by non-residents and report certain information relating to these
accounts to the CRA.
— Under the MCAA, each signatory maintains complete control over the
subsequent automatic exchange relationships they enter into.
— The MCAA will complement other measures introduced by the Government to
combat international tax evasion such as mandatory reporting of
electronic funds transfers of $10,000 and over, the Offshore Tax
Informant Program, and the creation of a dedicated Offshore Compliance
Division.
— Economic Action Plan 2015 proposed additional funding of $58.2 million
over five years for the CRA to combat aggressive tax avoidance by the
largest and most complex business entities. The revenue impact of this
measure is expected to be $540 million over five years.

Quotes

“By ensuring an increasing majority of people are playing by the rules, our Government is deepening Canada’s tax base while simultaneously lowering Canadians’ tax burden.

“The Harper Government has taken over 90 actions to strengthen tax compliance. Through more information sharing and better detection and compliance methods, those who want to evade their tax obligations have no place left to hide.

“The implementation of the Common Reporting Standard is yet another powerful tool to catch tax evaders. I am pleased to sign the Multilateral Competent Authority Agreement today and expand Canada’s partnerships with like-minded tax jurisdictions.”