Global Tax Alert (News from Americas Tax Center) | 17 January 2014

Canada launches Offshore Tax Informant Program

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Minister Kerry-Lynne Findlay today launched the Offshore Tax Informant Program (OTIP), announced in Economic Action Plan 2013 as the Stop International Tax Evasion Program, one of the new measures to crack down on international tax evasion and aggressive tax avoidance.

The new program will allow the Canada Revenue Agency (CRA) to pay individuals with information about major international tax non-compliance a percentage of the federal tax collected as a result of the information provided.

Under OTIP:

  • The information an individual gives the CRA will be reviewed to decide if there is evidence of major international tax non-compliance that would ultimately lead to additional taxes being assessed and collected.
  • The CRA will enter into a contract with the individual if the potential additional assessment of federal tax, excluding interest and penalties, is more than $100,000.
  • A payment will be made to the individual after the tax debt has been collected and all recourse rights associated with the assessed tax have expired.

Canada Revenue Agency news release, 15 January 2014

On 15 January 2014, the Canada Revenue Agency (CRA) officially launched its new Offshore Tax Informant Program (OTIP). The new program (originally referred to as the Stop International Tax Evasion Program) was first announced in the 2013-14 federal budget as one of five measures aimed at strengthening the CRA's ability to crack down on international tax evasion and aggressive tax avoidance.

The other measures include more detailed foreign reporting requirements, extension of the normal reassessment period for failure to report specified foreign property income or Form T1135 information, a streamlined process for obtaining information on unnamed persons, and mandatory reporting to the CRA of international electronic funds transfers over $10,000.

The program draws on international leading practices, including those from members of the Organisation for Economic Co-operation and Development (OECD). As an example, the US Internal Revenue Service Whistleblower Office rewards individuals who come forward with information on major cases of tax evasion.

Under the OTIP, an individual may qualify for a financial reward for providing information to the CRA on international tax non-compliance that leads to an assessment and collection of federal taxes (before interest and penalties) in excess of $100,000. The financial reward will be between 5% and 15% of the federal tax collected (excluding interest and penalties). The reward percentage is based on various factors such as the quality and relevance of the information and cooperation of the informant.

What is international tax non-compliance?

International tax non-compliance involves foreign property or property located or transferred outside

Canada, or transactions conducted partially or entirely outside Canada. Although not an exhaustive list, examples would include:

  • Undeclared Canadian taxable income that has been transferred outside of Canada
  • Undeclared foreign taxable income
  • Undeclared foreign property
  • Tax avoidance schemes that involve offshore transactions
  • Undeclared trusts held offshore in respect of which possible federal income has not been declared

Eligibility of OTIP informants

To be eligible under the program, individuals must provide the CRA with specific and credible details of major international tax non-compliance (the potential additional assessment of federal tax, excluding interest and penalties, must be more than $100,000). The OTIP is open to individuals resident anywhere in the world, subject to certain exceptions.

The following individuals are not eligible for the OTIP program:

  • Individuals who have been convicted of tax evasion in connection with the reported non-compliance activity
  • CRA employees
  • Federal, provincial or municipal employees, officials or representatives who acquired the information in the course of their employment duties

  • Contractors who acquired the information in the course of their duties for a federal, provincial or municipal government
  • Individuals who have been convicted of an offense listed in section 750 of the Criminal Code (such as fraud against the government)
  • Individuals involved in the non-compliance activity or authorized representatives of a taxpayer involved in the non-compliance
  • Individuals who provide information that has no merit, lacks sufficient, specific and credible facts, is already known to the CRA or is generally speculative
  • Individuals who are legally required to disclose the information to the CRA
  • Individuals who are providing the information anonymously
  • Individuals who obtained the reported information from an ineligible individual

Confidentiality of information

The information collected from an informant is covered by the confidentiality provisions of the relevant federal tax legislation, as well as privacy laws that impose limits on what the CRA can disclose.

The CRA has stated that it will protect the informant's identity to the fullest extent possible. However, certain circumstances may require an informant's identity to be revealed such as when the informant is required as an essential witness in a court proceeding.

How to submit OTIP information

As a first step in reporting an international tax non-compliance matter, the CRA recommends that the informant call their special OTIP hotline at 1 855 345 9042 (North American toll-free number) or 613 960 4265 (collect calls will be accepted).

Where it is determined the informant's case generally meets the CRA criteria, a case number and instructions on how to submit the information to the program will be provided.

The next step is to make a written submission. The informant must include a signed cover letter and the case number provided during the initial call (if applicable). Where more than one person is making a submission, each individual must sign the cover letter indicating that it is a multiparty submission.

The submission should be marked “Personal and Confidential” and addressed to:

Offshore Tax Informant Program
P.O. Box 9715
Ottawa ON K1G 4H5

Additional OTIP information

Further details on the OTIP are available on the CRA website. Topics addressed include:

  • How to submit information to OTIP
  • Confidentiality of information
  • The informant award process
  • Award payment criteria
  • Eligibility for the OTIP

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (Canada), Toronto
  • Yi-Wen Hsu
    +1 416 943 5310
  • Mark Kaplan
    +1 416 943 3507
  • Heather Kerr
    +1 416 943 3162
  • Trevor O'Brien
    +1 416 943 5435
  • Linda Tang
    +1 416 943 3421
  • Andy Tse
    +1 416 943 3024
Ernst & Young LLP (Canada), Montreal
  • Albert Anelli
    +1 514 874 4403
  • Angelo Nikolakakis
    +1 514 879 2862
  • Nicolas Legault
    +1 514 874 4404
  • Nik Diksic
    +1 514 879 6537
Ernst & Young LLP (Canada), Calgary
  • Karen Nixon
    +1 403 206 5326
  • Mark Coleman
    +1 403 206 5147
Ernst & Young LLP (Canada), Vancouver
  • Eric Bretsen
    +1 604 899 3578
Ernst & Young LLP, Canadian Tax Desk, New York
  • Andrea Lepitzki
    +1 212 773 5415
  • Terry McDowell
    +1 212 773 6332

EYG no. CM4110