Canadian Lawyer

w w w . c a n a d i a n l a w y e r m a g . c o m A P R I L 2 0 1 9 47 joins 87 other nations to counter tax evasion and avoidance. Globally, $100 billion to $240 billion is lost every year through tax avoidance, Grace Perez Navarro, deputy director at the centre for tax policy and administration at the OECD, told Canadian Lawyer. Armed with funding from the 2017 and 2018 budgets, Morin says, the CRA has developed better tools to combat interna- tional tax avoidance, including access to all international electronic funds transfers of more than $10,000 leaving the country, "automatic exchange of offshore banking information and disclosures from multi- national corporations," more international collaboration, an informant program, tight- ened enforcement of promoters of abusive or illegal tax schemes and the general anti- avoidance rule. The Panama Papers put international tax evasion on the minds of citizens and policy- makers around the world — following the leak of 11.5 million documents from the Panamanian law firm Mossack Fonseca, which was facilitating tax-evasion schemes. The CRA reviewed the Panama Papers and found 2,670 individuals linked to Canada with money in 3,330 offshore entities. As of the time of the 2017 annual report, the CRA was auditing 1,100 taxpayers connected to offshore accounts. "The government of the day likes to think that there's a big, big pot of cash and [it's] sitting out there in the international tax-avoidance arena," says Kim Moody, CEO of Moody's Gart- ner Tax Law LLP. "I just don't think that it's as big as they think it is. It might be big for certain jurisdictions, but not for Canadians," says Moody, whose firm, a mixture of accountants and lawyers, represents private clients including individuals, partnerships and trusts. On the domestic front, the housing markets in Toronto and Vancouver are notoriously inaccessible and inflated. Partly as a response to the difficulty among prospective house buyers who aren't multi-millionaires, the CRA has sharpened its focus on the real estate industry. From 2015 to 2018, the CRA audited or reviewed 38,610 real estate files in the greater Toronto and Van- couver areas and has served more than $70.9 million in penalties for Canadian real estate transactions during the same period. For those buying and selling their home, any profit made on the transaction is protected from tax by the principal residence exemption. Those who flip houses for business purposes are expected to pay tax on their gains. House flippers have been running into the CRA when they incorrectly claim the prin- ciple residence exemption or report their profit on a property sale as a capital gain. "So, the CRA has definitely smartened up a little bit about it . . . which again, frankly, as a taxpayer, I appreciate and wel- come because I've seen abuse as well," says Timokhov. Part of the reason for the aggressiveness in real estate transactions is that the real estate market and the economy, in general, are on the upswing, whereas in a recession there is less opportunity for profit, says Jeff Radnoff, senior partner at Radnoff Law Offices in Toronto. The heightened assertiveness of the tax man is leading taxpayers to be more proac- tive, getting lawyers involved earlier in the process, says Dompierre. The CRA and, in Quebec, Revenu Québec, are demanding more and more information from taxpay- ers, sometimes seemingly on a "fishing expedition," and Dompierre says she encour- ages her clients to ask for help at that stage, as it is easier to control the message and mitigate the process. "I think it is good because we, in tax litigation anyways, we get into the file a little bit late sometimes. And then it's harder to help the taxpayer," she says. Some of the CRA's new resources are being used to enforce GST/HST filing. In 2018, the CRA completed more than 70,000 GST/HST audits and examinations, which produced $3.5 bil- lion. Timokhov says many of the issues coming out of the GST/ "The government of the day likes to think that there's a big, big pot of cash and [it's] sitting out there in the international tax-avoidance arena. I just don't think that it's as big as they think it is." Kim Moody, Moodys Gartner Tax Law ntitled-4.indd 1 2019-03-13 8:29 AM

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