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LGT bank and went to court to force the Royal Bank of Canada to divulge information regarding bank custom- ers suspected of having undeclared accounts at LGT. Undisclosed offshore accounts are a "continuing problem" for affected Canadian taxpayers who have likely been worrying about undisclosed for- eign accounts for years, notes Ottawa tax lawyer Paul DioGuardi, co-author of The Taxman is Watching. "I have been sort of preaching for years that they were going to be attacking them with more vigour," he says. "Even I didn't realize that they would start paying people to steal [banking information]." CRA statistics show the taxman is making progress. Since last May, 2,562 Canadians have stepped forward under its voluntary disclosure program to reveal nearly $600 million in offshore income, a big jump from the prior 12 months when 1,858 people disclosed $100 million in previously unreported offshore money. That success has got Ottawa talking tough. "It is not a question of if we will find you," former revenue minister Jean- Pierre Blackburn said last December. "It is a question of when." But international information shar- ing and tough rhetoric aside, the biggest obstacle to the CRA finding as much as $100 billion in offshore accounts may be its own policies, argues Adrienne Woodyard, who recently joined Davis LLP. The CRA's voluntary disclosure program is essentially a 10-year amnes- ty against criminal prosecution, fines, and civil penalties regardless of the amount of tax evaded or the type of evasion involved. In theory, a taxpayer who qualifies for the VDP would only have to pay back taxes and arrears interest. That is a major concession as fines and penalties can total 50 to 250 per cent of the amount of tax evaded. Woodyard compares the CRA pro- gram to that of the IRS and finds the Canadian version lacking. While the U.S. amnesty requires the payment of penalties as well as back taxes and interest, it only looks at unreported income over a six-year period. That short time frame established by the IRS was key to its success, she says. The CRA program, by contrast, has no time limit, meaning back taxes and interest could have accumulated to "stagger- ing" amounts. To make the Canadian program even less attractive to taxpay- ers looking to come in from the cold, the CRA has taken the position that it has no discretion to waive penalties — which are equal to 50 per cent of the tax and interest on those penalties — past the first 10 years. For those with disclo- sures going back 20 or 30 years, that's not much of an amnesty. "This is a real disincentive to peo- ple [who] otherwise might want to come forward to clean up their tax affairs to actually coming forward," says Woodyard. "By failing to give any tax relief past the 10-year mark, the CRA is basically thumbing its nose at peo- ple who might want to come forward because they are making it completely 30 JUNE 2010 www. C ANADIAN Law ye rmag.com Untitled-3 1 5/17/10 10:08:31 AM