CRA has double standard for tax cheats

The CRA won’t divulge the identities of people convicted for stashing millions offshore, but it names and shames those caught owing small amounts of tax.

The Canada Revenue Agency claims at least nine people have been convicted of offshore tax evasion over the last two years, receiving $4 million in fines and 84 months of jail time, but it is keeping the names of these tax cheats secret.

Yet there are dozens of people — carpenters, hairdressers, farmers, plumbers, foresters, realtors, architects — who are named and shamed on the CRA’s website for not paying small amounts of tax.

This double standard means that small business owners who fall behind on tax payments, or servers who don’t declare their tips, are publicly outed for their relatively paltry offences, while wealthy individuals and businesses caught hiding millions in offshore tax havens are guaranteed anonymity.

Even though criminal convictions for tax evasion should be public information, without the defendants’ names, case numbers or knowledge of which courthouse the convictions were handed down in, it’s impossible to determine the identities of offshore tax cheats.

In the wake of the Panama Papers revelations, Ottawa pledged $444 million over five years to crack down on tax cheats and said it will focus on those who use offshore tax havens. But in several high-profile cases of offshore tax evasion that have emerged over the last year, including one scheme in which KPMG helped wealthy clients hide $130 million in the Isle of Man, the perpetrators remain unnamed.

“Although the CRA can provide aggregate statistics on the convictions with links to money or assets held offshore, we are not able to give the names and case numbers of the people convicted as this may contravene taxpayer confidentiality,” wrote CRA spokesperson David Walters in an email to the Star.

“The details that we are able to include in our conviction news releases is limited to what is presented in the courts and part of the public record. As a result, if the public record does not include information linking the convicted taxpayer to money and assets located offshore, we are not able to report this information,” he wrote.

In April, the federal anti-money-laundering agency, Fintrac, fined a bank $1.1 million for failing to report a suspicious transaction, but refused to name the institution.

“It’s outrageous,” said NDP MP Murray Rankin. “All the CRA wants to do is go after big penalties for the hairdresser who wrote off more than she should.”

The former revenue critic says the policy contributes to the development of a two-tier tax system.

“The people who have the ability to arrange their affairs using tax havens tend to be large family trusts, corporations and the like, whereas the government goes after little people to collect their taxes very aggressively,” he said.

While the CRA will not divulge the identities of people caught stashing millions overseas, it has no problem naming people who were charged for owing small amounts of tax.

In January, the agency posted a news release on its website naming eight Ontarians and two businesses that were fined between $1,000 and $8,000 after they were “convicted and sentenced for failing to file corporate, personal and/or GST/HST returns.”

One of those people is Dragan Micanovic, a 59-year-old cabinetmaker from Etobicoke, who was fined $2,000 for failing to file tax returns. His company, CIC Fine Woodworking & General Contracting Ltd., was also fined $2,000.

Micanovic, who fled war-torn Bosnia with his wife and two small children in the late 1990s, arrived in Canada “with nothing,” he said, and built his business from scratch.

“It’s not fair,” said the silver-haired craftsman as he stood on a carpet of sawdust in his Mississauga workshop. “It’s very hard for the little people.”
“Last year, the CRA froze my account. They took money. I lost insurance,” he said. “I say: ‘If you freeze my account, how can I work? How can I pay tax?’ ”

For years, Micanovic’s bread and butter has been replacing kitchens in rental apartments, he said, explaining that each building brought him about 10 kitchens a year. But when he lost his contract with a major landlord, he said he no longer had regular income and was owed $120,000 for work he’d already done.

“I lose business and I don’t know what to do,” he said. “The bank don’t want to help you. Nobody help you.”

“Big companies, Bell, Rogers, if I don’t pay my bill, they cut off the phone. But if my client doesn’t pay, what can I do but cry?”

Desperate to make ends meet, Micanovic took out lines of credit and maxed out his credit cards in order make mortgage payments, pay rent on his workshop and support his daughter’s university education.

“I have enough for rent, but no money to live,” he said.

Micanovic moved to a workshop with cheaper rent and even shut down his business in an effort to put the debts behind him. But soon the CRA started calling.

“They no stop calling you,” he said. “I stopped answering the phone.”

He filed five years of tax returns for his now defunct business, but that did little to dissuade the CRA.

“My bookkeeper sent them everything. He put zeros everywhere, but they still want money. They push you, push you, push you. I don’t get paid for three months, they don’t care. And they no try to help you. That’s the problem.”

“If you have no money, they charge you interest. And it goes on and on. It never ends.”

Beyond keeping them anonymous, some critics say the CRA is misleading the public about the number of prosecutions of offshore tax cheats.

Queen’s University tax law Prof. Arthur Cockfield questions the CRA’s claims to have convicted any real offshore tax evaders.

“I can’t find any successful prosecutions,” he said. “I’ve had researchers look.”

If the government doesn’t publicize the names of convicted offshore tax cheats, there’s no deterrence for others who might go down the same path, Cockfield said.

“If you want to deter criminals, convict them,” he said.

Sen. Percy Downe, who has made cracking down on offshore tax evasion his personal quest, said he has not been able to get a single name out of the CRA.

“The CRA does an outstanding job on domestic tax evasion. If you owe money to the Revenue Agency and you live in Canada and you bank in Canada, your chances of getting caught are extremely high. There are criminal charges, prosecutions and jail sentences,” Downe said. “But there hasn’t been one overseas tax evasion conviction.”

“There’s no penalty,” Downe said. “Nobody has gone to jail for this. The carpenter from Saskatchewan or the plumber in New Brunswick, it’s a different story. They’re shamed and charged and so on.”

In 2013, the CBC filed a freedom of information request and received a list of 25 names of people convicted for offshore tax evasion. But after going through court records, the CBC determined that only eight of the people on the list actually were actually found guilty of hiding income or assets in a tax haven.

In an effort to bolster offshore tax prosecutions, the CRA launched an offshore tax cheat tip line in 2014, offering informants 5 to 15 per cent of the amount recovered, as long as it’s more than $100,000.

The agency says it has launched 140 tax audits based on tips that came in through the program. But to date, there have been no convictions and no awards have been paid out.

The CRA reports that 145 people have been convicted for tax evasion or fraud since April 1, 2014. The tax cheats were fined $14.1 million for evading $19 million in federal tax, and received 1,219 months in jail.

Nine of these people were involved in offshore activity in 2014/2015, the CRA says, though it was unable to break out statistics for convictions linked to money and assets held offshore for 2015/2016.