In Early February of this year, the CBC’s investigative journalism team uncovered documents that showed the Swiss arm of English based HSBC Bank actively aided hundreds of Canadian taxpayers hide secret accounts from the Canada Revenue Agency (“CRA”). With the aid of HSBC Switzerland, approximately 2000 Canadian taxpayers were able to avoid paying millions of dollars in taxes to the CRA. The revelations were much more far reaching than a few thousand Canadians – citizens of dozens of countries, many with far larger balances and volume of accounts were also uncovered, making the Canadians just a small part of the overall story.
Whistleblower Tipped off the Press
The story behind the discovery of these accounts is not a typical one of governments exerting pressure to extract information from normally secretive foreign banks. In fact, the information came from an HSBC insider. A former employee of the English bank came forward as a whistle-blower, and when he did he also turned over a plethora of data that allowed government taxing authorities all over the world to identify domestic tax evaders.
The amounts in question with ties to Canada are considerable – approximately four billion dollars Canadian has so far been discovered scattered across approximately 2000 bank accounts. While many accounts were later discovered to be closed or empty, some others are presumed to contain hundreds of millions of dollars.
The Canadian Connection
One snag in the CRA’s ability to investigate the owners of the accounts is that HSBC appears to have aided some of these clients by registering accounts via number only – with no identifying information to readily tie the accounts to an individual. Further compounding the problem for CRA is the fact that many of the accounts owned by Canadians are registered to corporations resident in other tax havens such as the British Virgin Islands and Panama.
At this point, HSBC headquarters in England is claiming that their tax compliance measures were not fully implemented when the Swiss private banking arm of the company was purchased in the late 1990s. However, HSBC also states that it is now actively attempting to address the issue by imposing stricter compliance measures and also helping foreign governments identify their citizens who have accounts.
At many foreign banks the story is a familiar one – increasing pressure from foreign authorities, particularly the United States and the IRS, is leading to more and more transparency. It is likely that very soon those with overseas income that they have failed to report will have nowhere left to hide. However the good news is that there is still time for something to be done.
The Benefits of Doing a Voluntary Disclosure
Canadian taxpayers who have undeclared accounts and income should all consider the benefits of the CRA’s Voluntary Disclosures Program. Those who have decided to come clean with the CRA can and should take advantage of the program. One of our knowledgeable Canadian tax lawyers can negotiate with the Canada Revenue Agency on a taxpayer’s behalf to reduce interest and eliminate penalties and perhaps most importantly, take criminal prosecution for tax evasion off the table.
Of the almost 2000 taxpayers implicated in the HSBC leak, some two hundred and sixty have come forward and made voluntary disclosures to the Canada Revenue Agency. Because of this, the CRA has clawed back approximately $28.4 million in unpaid taxes and agreed not to prosecute for these amounts. These taxpayers can rest easy knowing that they have fully availed themselves of a program.
Those who wait run the risk of huge interest bills, massive penalties and even prison sentences for tax evasion.
Canadian Tax Lawyer Advice
One of our experienced Canadian tax lawyers can help you manage the voluntary disclosure process. Our tax lawyers have experience with hundreds of disclosures with all types of situations and circumstances. If you have unreported income of any kind give our experienced team a call, we can negotiate with the CRA to reduce interest, eliminate penalties and ensure that you will be fully protected and compliant for moving forward.
Disclaimer:
"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."