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Canada Revenue Agency Sees a Boost in Funding, Which Means Canadians Can Expect a Boost in Tax Scrutiny

25/04/2016


The federal government released its new budget on March 22, 2016. In the new budget, the government allocated a total of $444.4 million to the Canada Revenue Agency (CRA), to be released over a five year period, in efforts of increasing the CRA’s ability to detect, audit and prosecute tax evasion both at home and internationally. While no official breakdown has been surrounding how the funds will be allocated, the agency announced a new branch being created as of April 1, 2016, which would be dedicated to aggressive tax planning, criminal investigations and new "strategies to combat offshore tax avoidance." Budget documents indicate these strategies will include “hiring additional auditors and specialists”, “developing robust business intelligence infrastructure”, expanding verification programs, and improving the quality of tax evasion investigations.

In addition, the CRA will be receiving $351.6 million over five years to improve its ability to collect tax debts, along with another $185.8 million over the next five years to expand and improve its services and administration.

What does this mean for Canadian taxpayers? We can expect to see a significant increase in reviews, audits and reassessments over the next five years. In fact, the increase in funding will boost the number of taxpayers’ reviews from approximately 600 per year to at least 3,000, potentially raising an additional $432 million in tax revenue. Furthermore, the CRA plans on investigating high-risk multinational corporations, a strategy which the agency hopes will lead to an additional $500 million in revenue over a five year period.

A significant focus will be placed on offshore tax evasion. When National Revenue Minister Diane Lebouthillier held a news conference on April 11, 2016, she indicated that since January 2015, the agency has been collecting information pertaining to all international funds transferred in amounts higher than $10,000. While the first investigation will be delving into funds held in the Isle of Man, in-depth inquiries into other jurisdictions will likely follow suit in May of 2016.

At MNP, we fully support the CRA in taking further steps towards mitigating tax evasion. At the end of the day, tax evasion is an illegal activity, which negatively impacts Canadian individuals, communities and businesses across the board. It is our hope that as the CRA continues to enhance its effectiveness in recouping lost tax revenue, the agency put the right people and processes in place to make sure that businesses who are compliant with Canadian tax laws, aren’t unnecessarily targeted or disrupted.

With an increase in audits for companies of any size across Canada, authorities have put more onus on taxpayers to be prepared which can lead you to challenging assessments. We have the in-depth knowledge and up-to-the minute insights into significant tax news, developments and changes in legislation that could affect Canadian businesses. Our Tax Services team will take the time to fully understand your business, ensure you comply with applicable laws and help you develop tax strategies that allow you to capitalize on every opportunity – so you can focus on what matters most, your business.

For more information, contact Loren Kroeker, CPA, CA, Senior Vice President, Taxation Services at 250.753.8251 or [email protected].