A criminal investigation by the Canada Revenue Agency of KPMG’s use of an offshore tax haven ended more than a year ago without any public announcements, sources have told Radio-Canada.
The status of the case is uncertain. The Canada Revenue Agency (CRA) declined to comment on the file, as did federal prosecutors with the Public Prosecution Service of Canada, which has been following the file closely over the years.
KPMG did not respond to requests for comment.
In a series of news stories going back to 2015, CBC and Radio-Canada have reported that KPMG set up a procedure through which wealthy Canadians could transfer assets to a tax haven and then recover their funds tax-free.
The Isle of Man-based tax avoidance scheme had been active as far back as 1999 and, according to documents filed in Tax Court by the CRA in 2015, was “intended to deceive” the government.
Minister no longer talking about the case
In 2017, Revenue Minister Diane Lebouthillier promised to get to the bottom of the matter and to eventually make the findings of the investigation public.
“We’re going to go all the way and we’re going to catch them,” Lebouthillier told Radio-Canada in March 2017. “When everything comes out publicly, it’s going to be simpler.”
She also confirmed that a criminal investigation of both the investors and the accounting firm was underway.
“Indeed, because for those involved in setting up a scheme, that is also criminal,” she said at the time.
In an interview last week, however, Lebouthillier said she has to respect the confidential nature of the file according to the terms of the Income Tax Act.
“I can’t speak to any particular case,” she said.
She added that in any criminal investigation, the CRA works hand-in-hand with federal prosecutors.
“The agency investigates all kinds of files,” she said. “Once cases are put together, [the CRA’s investigators] work with the Justice department to determine whether the cases are brought to court or not.”
CBC and Radio-Canada have published multiple stories on the role played by KPMG — one of Canada’s largest accounting firms — in setting up a scheme to help multi-millionaires hide their fortunes in the Isle of Man.
The scheme enabled wealthy clients to dodge tens of millions of dollars in taxes in Canada by making it look as if they had given away their fortunes to anonymous overseas shell companies. They received their investment income back as tax-free gifts.
In 2016, a senior KPMG executive, Gregory Wiebe, told a parliamentary committee that this investment strategy had been verified externally and complied with the measures and standards in place at the time.
Wiebe said the Isle of Man tax arrangement — which netted the firm $1.6 million in fees for setting up 16 plans — “fully complied with all applicable tax laws” in effect in Canada in 1999 and has not been in use since 2003.
Wiebe said the Conservative government’s tightening of tax-shelter rules in 2013 and 2014 dramatically changed the landscape. He said his own firm now carefully reviews any tax-saving plan for “reputational” risk and to ensure it is legal and complies with general anti-avoidance tax rules.
Also in 2016, a senior CRA official told MPs that investigations in this matter were continuing — but didn’t say whether they were of a criminal nature or not.
“We’ve taken the position that the specific Isle of Man structure is not compliant. Only the courts can give us a final determination, and that hasn’t happened yet,” said Ted Gallivan, now a senior official at the Canada Border Services Agency.