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 J U N E 2 0 1 7 41 from a spouse and criminal lawyers with clients hiding assets off- shore — "those guys should all know about this, too." Individuals need to ensure they've reported, which is not a new requirement, but there's "a bit more of a spotlight on that in terms of foreign assets" in light of the CRS, Reymond says. "From that perspective, it's good for everyone. It's encourag- ing everyone to plan properly and that's a good thing for tax practitioners." Reymond adds that if a Canadian has a bank account outside of the country, it's wise to contact the banking institution that holds the account and ensure whatever information it will be sending matches the information on their tax forms. "It's our responsibility to get the message out to our clients — both residents and non-residents," says Horne. "For Canadian residents, the message is if you have offshore accounts you need to start disclosing the existence and income." He adds that for non-residents, it's still a similar message — make the disclosure under any available program in their home jurisdictions. Importantly, the disclosure must be made before any auditing starts because at that point, it's too late. "The bottom line is stop hiding and start disclosing," Horne says. Doobay says she foresees an increase in voluntary disclosures. "Tax lawyers have always advised clients about T1135 and the duty to report worldwide income, but with this transparency, they have to be on even higher alert that clients understand their duty to report and disclose," she says. Though the CRA might set its sights on the larger amounts, there's still a risk in not reporting smaller accounts, Doobay warns. Just the fact that a Canadian has assets outside of Canada will put the CRA on alert in case there's an audit. She gives the example of a taxpayer undergoing a net worth assessment who has not claimed offshore accounts with less than $100,000. For that assessment, the CRA will still have access to those funds. "If they're looking at all assets, it doesn't matter the amount — they can find your offshore account," Doobay says. "Now they have access to this kind of information." Horne agrees, adding that if the CRA uncovers a large offshore account it can start asking questions and cross-referencing with the person's tax returns. "Canada's going to say, you have this account in a foreign juris- diction, you're earning income on it and haven't reported it?" he says. "The CRA can always audit you — there are no restrictions." Reymond says that, logically, the CRS should result in more audits. From a tax practitioner's perspective, that means more audit work will likely materialize in the next few years. "The audit process — at least the start of the audit process — will presumably be much easier for the CRA," he says. The information coming into the CRA is likely being pro- cessed and red flagged based on amounts in the accounts, Horne says, and overall accounts are coming under greater scrutiny. "They're developing programs that help identify and red flag these types of issues," Horne says. "One of the things we tell our clients is if they're not disclosing their accounts the risk of discovery is getting higher and they should be doing it. It's another way of expressing to our clients that they need to do this because sooner or later the CRA is going to find out." Reymond says he's heard the opinion that there will be so much information floating around it will be useless, so there's no need to worry about the CRS. But the information that gets exchanged includes the individual's taxpayer ID number — a resident's Social Insurance Number in Canada — so "to me, it's very easy for the CRA to punch that SIN number in and see what they've received on that individual," he says. "With all that information coming in from the CRS, they don't have the government power to handle this," Doobay says. "The CRA is overwhelmed and understaffed." But she notes the 2017 federal budget designated $523.9 mil- lion over the next five years to hire more auditors and develop computer systems that would prevent tax evasion and encourage compliance. For Reymond, more interesting questions will arise in the next few years as it starts to become clearer how tax authorities are going to use the information. He speculates they could proceed with regular audit cycles but have more information to look at that could help with the audit, or maybe it's "as easy as if there's a report on a particular individual showing asset levels above a certain threshold, that person gets audited immediately or put on a pile to consider." Over time, the CRA is going to develop systems, he says, and however the CRS plays out in practice, it's "going to be very inter- esting to see how that will work." Integrated Legal Marketing Solutions LawyerMarketingCanada.com/solutions Put Your Digital Marketing Tactics into High Gear ntitled-2 1 2017-05-15 4:47 PM

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