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CRA has found 35 cases of tax dodging in the Panama Papers leak, 5 years later

Five years after one of the world’s biggest leaks of financial records exposed the tax-haven dealings of politicians, athletes, celebrities and mobsters, the Canada Revenue Agency has found missing money in 35 of the hundreds of Canadian cases it has analyzed. 

The agency hasn’t gotten a single criminal charge filed against anyone as a result of the Panama Papers.

Other countries have, however, filed tax-evasion charges, secured convictions and recouped hundreds of millions of dollars in taxes from information found in the Panama Papers.

“I was feeling patient — it does take time to investigate and prosecute — but now it’s been five years,” said Toby Sanger, executive director of the advocacy group Canadians for Tax Fairness. “We’ve just seen too little compared to what’s happened in other countries.”

In updated data provided to CBC and Radio-Canada, the CRA said its research identified 900 or so Canadian individuals, companies and trusts in the Panama Papers leak. An initial triage of those taxpayers determined that about 60 per cent of them, or around 540, “were found to have complied with their tax reporting obligations,” so they didn’t warrant an audit. 

Among the remaining cases, as of the end of last year, close to 200 audits have been completed, with another 160 still underway.

Of the completed audits, 35 resulted in new taxes or penalties for a total of $21 million, the CRA said. 

There are various reasons why so many people and companies with links to bank accounts or corporations set up in offshore tax havens might not actually have any tax owing, the CRA said. Those include: cases where someone set up an offshore shell company but never used it for anything, or used it to buy an overseas vacation property that they still own so no tax has come due yet. They also include cases where a Canadian listed in the Panama Papers wasn’t the true owner of a company they were associated with, but perhaps just served as a paid front for it.

“It is important to note that the presence of a person’s name on this list does not imply tax non-compliance from a Canadian tax perspective,” the CRA said in a statement.

$1.7B global tax windfall

The Panama Papers, publicly revealed five years ago on April 3, 2016, were one of the biggest leaks of financial records the world has seen. The 11.5 million documents, from 200,000 accounts based in an array of offshore locales, came from Panama City-based global law firm Mossack Fonseca, which closed for good in 2018 amid the scandal.

The leaked files exposed the assets and murky fiscal dealings of everyone from prime ministers and presidents to soccer players, movie stars and notorious criminals, and resulted in a push in many countries to prosecute people exploiting tax havens and to clamp down on tax evasion and aggressive tax avoidance.

Data compiled by the Washington-based International Consortium of Investigative Journalists, the organization that co-ordinated reporting on the Panama Papers by global media outlets including CBC, show that the equivalent of at least $1.7 billion in taxes and fines has been recouped by tax agencies in two dozen countries as of last month.

The totals include a high of $317 million collected by tax officials in the United Kingdom, $246 million recouped in Germany, $106 million claimed in Ecuador and $21 million in tiny Malta. 

While Quebec allowed voluntary disclosures from people in the Panama Papers, the federal government generally did not, which is one reason why its early haul is lower.   

Some countries have fared proportionately worse than Canada: Austria (population 9 million) has recovered the equivalent of $3.4 million thanks to the Panama Papers and Mexico (population 126 million), recovered a relatively modest $27 million.

The $21 million that the CRA has assessed, as of the end of last year, is up from $15 million in taxes and penalties as of two years ago.

The agency could not disclose how much of that has actually been collected. CRA said taxpayers might owe money for different tax years due to various assessments, and pay it off in chunks that don’t allow a determination of which amounts stemmed from which tax debts.   

marwah rizqy
Marwah Rizqy, a tax law professor and Quebec legislator, says a former senior CRA manager once told her that the agency finds criminal investigations and prosecutions to be too expensive. (Sylvain Roy Roussel/CBC)

The CRA also said that the 160 Panama Papers audits still underway would likely turn up a more lucrative chunk of unpaid taxes since they are “the more complex and challenging audits.”

“Wealthy taxpayers often have complex tax arrangements resulting in lengthy information gathering processes,” the agency said in an email. “These audits, where non-compliance is identified, can be very time consuming and generally result in significant assessments.” 

Criminal probes dropped

Even as the CRA’s potential tax haul rises, it’s looking less likely that any Canadian named in the Panama Papers will end up in jail for tax evasion.

Two years ago, the agency said it had five criminal probes underway due to the Panama Papers. But it has since dropped three of those, with no charges laid. The other two are ongoing. The CRA noted, however, that new investigations could be opened as it obtains more information.

Marwah Rizqy, a tax law professor at the University of Sherbrooke and a provincial Liberal member of the Quebec legislature, said she once heard from a CRA senior manager that the agency prefers to negotiate out-of-court settlements because criminal investigations and prosecutions are too expensive. 

“Financial and tax crimes, particularly complex ones, aren’t taken seriously,” she said. “It means we more or less have a two-tiered system.”

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