Canadians implicated in the Panama Papers shouldn't expect any leniency from the tax man at this point, the Canada Revenue Agency says.
Since the massive leak of account information was made public in May, many Canadians have been named in the story of Panamanian law firm Mossack Fonseca and its role in setting up foreign corporations designed to help people hide money offshore.
The CRA has been sifting through the information looking for tax evasion, and said in a statement Monday that those efforts have ensnared a few thousand files now being pursued by the tax agency.
"Over 2,000 files are being reviewed and 85 taxpayers are currently under audit," said Chloé Luciani-Girouard, press secretary for Revenue Minister Diane Lebouthillier.
Ordinarily, the tax agency has a Voluntary Disclosure Program (VDP) that allows Canadians to fess up about offshore holdings before the tax man sniffs them out. Anyone who comes clean has to pay tax on the assets, but the reward for participating in the program is that there is no further punishment.
But that won't apply for anyone on the CRA's list who have yet to be audited after popping up in the Panama Papers.
"The taxpayers under audit can't qualify for the Voluntary Disclosure Program," Luciani-Girouard said. "And it is highly unlikely that any others would."
"Given the significant information the CRA has in relation to the Panama Papers, any VDP request would be referred to Offshore Compliance agents who, barring any exceptional circumstances, would confirm that the taxpayer is not eligible because compliance interventions are planned for all identified participants."
Tax lawyer Alex Klyguine at Borden Ladner Gervais LLP says he's not so sure it's too late for anyone ensnared in the Panama Papers to come clean.
Too late to come clean?
"For example, if the CRA enforcement action is not likely to uncover the information that the taxpayer would be willing to disclose through the voluntary disclosure program, the taxpayer may be eligible," for the VSP, Klyguine said in an interview.
The CRA may only know little more than the person is a director at a company overseas, and little else about the activity. "It's never as simple as a bank account," he said, noting that foreign corporations, holding companies and active bank accounts drawing interest and fees are treated very differently.
"What is the point of the money being there?" is what the CRA is trying to get at, he said.
That's why he thinks it's never too late to come clean, even for those names in the Panama Papers.
Many search warrants are already underway beyond the 85 official audits, but the CRA says it can't reveal the details of those proceedings because they may compromise the investigation or reveal confidential data.
Last April, Ottawa earmarked an extra $444 million to the CRA's budget to beef up its tax enforcement division. The tax agency says it is using part of those funds to hire 100 auditors to look into "high-risk" potential tax evaders.
It's all part of Ottawa's increasing scrutiny on tax cheats.
"The minister firmly believes that hiding income and assets in foreign jurisdictions to avoid paying taxes is a serious issue that robs all hard-working Canadians of important services," Luciani-Girouard said. "By increasing Canada's collaboration with international partners, we are taking an active role in ensuring a fairer tax system, where tax cheats face consequences for their actions."
Lawyer Klyguine says while the impact of the Panama Papers leak goes on, it's likely to be somewhat small. But the story is just the tip of the iceberg for tax evasion.
In July, after the Panama Papers leak had gone public, Panama signed an OECD agreement to share banking information with 100 other nations as part of a global push to stamp out tax evasion.
The Panama Papers are limited to just activities from one law firm, in one offshore tax haven. "But what if you went to a different law firm?" Klyguine said. "What if you didn't use a lawyer?"
He expects a lot more activity from the CRA on the subject of tax evasion, because the funds recouped are far outstripping the cost of looking for them.
"I'm all for making sure people are tax compliant [and ]things are moving in the right direction," he said. "People should be aware that they could be next if they haven't come clean."