Accounting, Business, Tax
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Tax authorities target undisclosed foreign assets

A letter recently sent to some Canadians “strongly” encouraging the voluntary disclosure of potential undisclosed foreign assets and unreported foreign income is the latest indication that the Canada Revenue Agency is stepping up efforts to crack down on international tax evasion and aggressive tax avoidance.

A growing number of wealthy Canadians are coming clean with concealed assets in foreign tax havens through the CRA’s voluntary disclosure program after lists emerged over the past couple of years with information revealing the names of supposed Canadians who allegedly have offshore accounts. The number of offshore disclosures increased from 1,215 in 2006‐2007 to 5,248 in 2013‐2014, representing over $2 billion in total unreported income since 2006‐2007, according to the CRA’s latest annual report. The CRA’s latest letter-writing campaign, which began last December, is widely expected to entice more Canadian taxpayers to come forward.

“It’s an inexpensive way of encouraging a greater level of compliance,” noted Michael Friedman, co-chair of McMillan LLP’s tax group. “Having a one-on-one audit can be costly for the CRA, and while those types of audits may be more effective in generating revenue for the tax authority, writing a letter to a taxpayer is inexpensive. When someone receives a letter from the CRA, they think twice.”

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