How should you handle information about people who cheat on their taxes? Report the offenders. We are afraid, or too nice, or can't be bothered unless it affects us directly.
People who cheat on their taxes do affect us directly, we pay more taxes at higher rates to cover deficits in funding our government programs for schools, roads, health care, education, and other programs because not everyone is paying their fair share.
It's funny, we let people get away with cheating unless we're angry at an ex-spouse, of course, then we're all over calling it in!
Contact CRA to report activity you are aware of. CRA listens and when they catch a couple of these people and the resulting tax court case are completed, they will get a great deal of publicity. We do have an Informant Leads Program to call with just such stories and the stories about successful cases is published on the CRA website. Just type in the word "convictions" on the CRA website at www.cra-arc.gc.ca to read about the story and the consequences of not complying with tax legislation.
What else should be done? Please contact your Member of Parliament to share this blog and the story that prompted this post so they can bring it up to question the Finance Minister about why S. 212(1)(b) was eliminated:
CRA auditors have some tools at their disposal already. They should be asking for documentation about any foreign receivables and checking information under exchange of information agreements (treaties)!
Recommended actions by Finance Minister :
Reporting requirements must be reinstated if this is the result of those requirements being taken away:
The Finance Minister should have a requirement that banks to report all interest earning balances held by non-residents where a Canadian resident has Power of Attorney or any signatory on any accounts held by non-residents
The Finance Minister should be considering whether it's appropriate to reinstate NR-4 reporting for non residents where annual interest payments to non-residents exceed a threshold of say $5,000 or where the bank knows of any relationship between non-residents and residents and there are multiple accounts to get around the requirements to report by utilizing affiliated, related, or connected parties with multiple accounts.
How should blatant tax evasion be handled?
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Canadian Wtihholding Tax Obligation: Monday morning rant...
I heard a story last week from another accountant about how people think they can get around the withholding rules.
This highlights unintended consequences of elimination of withholding tax on interest under Income Tax Act S. 212(1)(b) for non-residents.
I really didn't like this story and sincerely hope that this change in administration of foreign account reporting (click here to see third part of the link) will address this unfortunate situation by seeing through the non resident's ownership to the real ownership by the immigrant.
I hope the intent of this change is to force banks disclosure when there is actual interest by a resident in an account. What I heard about how this works, is that new immigrant all claim they sold their business before moving to Canada and have a receivable of about 5 or 10 Million for this sale that isn't going to be realized for a few years.
They move here, under our new immigrant programs, but claim to have no money because it's all receivable. They arrange with other non residents to open bank accounts, depositing millions into a Canadian bank that earn interest. Then, they have the non resident give them Power of Attorney over the accounts.
Why would they do this? Because as of this year, there was no longer a requirement to withold and issue NR4's to non residents with bank accounts in Canada. So no one is paying tax on the interest earned in those accounts. Even at 3%, that's still a lot of interest income, $30,000 per million and we're talking multi-millions, at least Five Million.
They live in Canada, in million dollar houses, with millions in the bank, with no income to report, because there are no bank accounts in their own name.
How NOT cool is this? If this is true, we are allowing people to immigrate here who don't contribute towards the cost of our health care systems, who use our roads and schools, while not contributing to the tax base. If this is true, who was asleep at the switch?
The other part of this story is these same immigrants are only claiming enough assets to qualify for the immigrant programs and not disclosing the full extent of their foreign holdings. Heaven help them if they get caught by our foreign reporting rules. There are huge penalties for not reporting foreign assets.
In Canada, we are not being honest with ourselves. Our self-assessing tax system is not effective in dealing with dishonesty, and that includes the dishonesty rampant in Canada by ordinary Canadians who don't report all of their income from cash sales, tips, trading and barter. It's everywhere, so you can't just blame the immigrants, they are just trying to fit in with the population, many of whom don't report all of their income either. Merchants in the malls tell me they don't report all of their income. If they did, they say, they wouldn't be able to stay in business.
We really need a simplified system that is fair, easy to administer and audit, plus one that people can trust that they are paying their fair share and where they feel like they can comply and still make a decent living.
Meals & entertainment revisited again...
.. It may be time to take a very close look at meal and entertainment claims, before an auditor does... The word on the street is that CRA's stance is that meals are only allowed on travel out of the area.
That is unless you are discussing business with a client or a supplier and have a record of why there was a business reason for the meal. Meals for promo purposes are being questioned.
Meeting with your staff for meals? Why? The result of losing the deduction on audit for a corporate employee is that the meal is added to your T4 as a taxable benefit. Can you afford to pay extra tax because you used company funds to buy your co-workers a meal?
You have to ask yourself, why am I buying lunch for the office staff? Is there a business reason? Does it meet the criteria for the number of 100% deductible meals for all staff as allowed by the Income Tax Act? And... why am I buying and giving tickets away to the game? To whom am I giving them, have I documented who got the tickets, and what's the business purpose for that gift of tickets to a game?
BC Assoc for Charitable Gaming
Did you know that net gaming proceeds were 33.33% in 1999 when the original agreement was signed, and have dropped to 12% in 2010?
If this matters to you, there's a deadline of September 15th to get in your presentation, no matter how humble.
Check out the BC Assoc for Charitable Gaming
Guidance changes
CRA provides guidance on complex topics
Donations of Gift Certificates or Gift Cards
and you'll find more here...
What's New in Gift Giving (Charities)?
CPP changes coming in 2012
CRA's explanation of the changes, yet again, another example of how complexity is overwhelming us.
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