OTTAWA: The Canada Revenue Agency offered amnesty to multi-millionaire clients caught using what’s been called an offshore tax “sham” on the Isle of Man — a reprieve that was supposed to remain secret and out of the public eye until it was uncovered by a CBC News/Radio-Canada investigation.
Canada Revenue officials demanded, and offered, secrecy in a no-penalty, no-prosecution deal to high net worth clients of accounting giant KPMG involved in a dodgy offshore tax scheme. (CBC)
The amnesty allows for “high net worth” clients of the accounting giant KPMG to be free from any future civil or criminal prosecution — as well as any penalties or fines — for their involvement in the controversial scheme.
The clients simply had to agree to pay their back taxes and modest interest on these offshore investments, which they had failed to report on their income tax returns.
Documents show that the scheme had attracted at least $130 million.
CBC/Radio-Canada obtained a copy of the confidential nine-page offer, signed on May 1, 2015 by CRA’s manager of offshore compliance, Stephanie Henderson.
It promised KPMG clients that the CRA would not impose any penalties for taxes dodged in a scheme that lasted more than a decade.
The offer was made despite CRA uncovering the KPMG scheme, which had at least 26 wealthy clients each investing a minimum of $5 million using shell companies on the Isle of Man.
Before offering the deal, the tax agency had already assessed huge penalties against a handful of the earliest clients, alleging the scheme was “grossly negligent” and had “intended to deceive” the minister of revenue.
CRA would not discuss any details of the leaked document with CBC News, let alone say how many of the high net worth KPMG clients decided to accept the offer.
Ted Gallivan, CRA’s assistant commissioner of compliance, says this case is still ongoing. But he said he had not seen the agency’s amnesty offer to KPMG clients, in particular its confidentiality clause, until CBC showed it to him. (CBC)
But a letter filed in court in September 2015 by a KPMG lawyer stated that 15 clients had “self-identified” to the federal tax authorities. Why they might have come forward remained a mystery until CBC News obtained a copy of the secret agreement.
A spokesman for Canada Revenue told CBC News that the CRA frequently resolves tax disputes through settlements.
“CRA practice also recognizes that the earliest possible resolution of disputes is in the public interest, as lengthy litigation is costly to all parties and the outcome of complex, tax-related litigation processes may be difficult to predict,” media relations officer Philippe Brideau said in a statement.
