CRA raids B.C. busi­nesses that at­tracted Asian in­vestors

The Globe and Mail (Prairie Edition) - - NEWS - DANIEL LE­BLANC OT­TAWA MIKE HAGER VAN­COU­VER

The Canada Rev­enue Agency is try­ing to re­coup mil­lions in al­legedly un­paid taxes from B.C. busi­ness­men who helped Chi­nese and other Asian in­vestors en­ter Cana­dian cap­i­tal mar­kets, ac­cord­ing to a court doc­u­ment ob­tained by The Globe and Mail.

Dozens of of­fi­cials from the CRA, the RCMP and the Van­cou­ver Po­lice Ser­vice raided six lo­ca­tions last Au­gust in con­nec­tion with the ac­tiv­i­ties of Van­cou­ver busi­ness­man Kin Foon Tai. The CRA doc­u­ment that was used to ob­tain the search war­rants al­leged that Mr. Tai (known as Joe Tai) and his busi­ness as­so­ciates used firms in the Caribbean and Hong Kong to shield $7.6-mil­lion in in­come over a nine-year pe­riod.

The $7.6-mil­lion fig­ure was de­scribed in the court doc­u­ment as “con­ser­va­tive” and is based on an ini­tial au­dit that iden­ti­fied up to $17-mil­lion in un­re­ported in- come. None of the al­le­ga­tions in the doc­u­ment have been proven in court, no charges have been laid and the in­ves­ti­ga­tion is on­go­ing. The CRA is the lead agency on the file, while the RCMP and the Van­cou­ver Po­lice pro­vided as­sis­tance dur­ing the raids.

The CRA al­le­ga­tions show the com­plex­ity of the kind of meth­ods it be­lieves are be­ing used to trans­fer and hide mil­lions of dol­lars around the world. The is­sue is of par­tic­u­lar con­cern in a prov­ince such as Bri­tish Columbia, where for­eign in­vest­ment in real es­tate came un­der in­creas­ing scru­tiny as the hous­ing mar­ket ex­ploded over the past two years.

The court doc­u­ment also shows the scope of the au­dit­ing and in­ves­tiga­tive re­sources the CRA needs to con­duct its grow­ing crack­down on tax eva­sion. The fed­eral tax-col­lec­tion agency re­ceived help in this case from the In­ter­nal Rev­enue Ser­vice in the United States, and a mas­sive leak of con­fi­den­tial in­for­ma­tion in 2013 com­piled by the In­ter­na­tional Con­sor­tium of In­ves­tiga­tive Jour­nal­ists (ICIJ).

“This search ac­tion is part of the CRA’s greater fo­cus on se­ri­ous tax eva­sion and off­shore non­com­pli­ance,” the CRA wrote in a writ­ten re­sponse to ques­tions from The Globe and Mail. “The CRA has re­viewed ev­ery Cana­dian con­nec­tion to the 2013 ICIJ leak and con­tin­ues to ap­ply the full range of civil and crim­i­nal com­pli­ance ac­tions avail­able to us, where ap­pro­pri­ate.”

The CRA in­ves­ti­ga­tion is tar­get­ing Mr. Tai and five other in­di­vid­u­als based in Van­cou­ver and Richmond in a case that also in­volves cor­po­ra­tions and in­di­vid­u­als in the Cay­man Is­lands, the Bri­tish Vir­gin Is­lands and Hong Kong.

Ac­cord­ing to the CRA, Mr. Tai and his as­so­ciates “in­tro­duced Asian in­vestors to Cana­dian cus­tomers,” and then hid a large por­tion of the money they were paid for this ser­vice through a num­ber of ac­counts in var­i­ous coun­tries, a tech­nique the doc­u­ment refers to as a “lay­er­ing strat­egy [that is] typ­i­cal of a money laun­der­ing op­er­a­tion.”

“This strat­egy in­volved at least six off­shore com­pa­nies, two Cana­dian cor­po­ra­tions, a num­ber of non-res­i­dent in­di­vid­u­als, and nu­mer­ous bank and in­vest­ment ac­counts to hide the in­come they earned from par­tic­i­pat­ing in the busi­ness op­er­a­tions of var­i­ous com­pa­nies/cor­po­ra­tions that were pur­ported to be non-res­i­dent,” the court doc­u­ment al­leged. “The afore­men­tioned lay­er­ing strat­egy was used to hide in­come and evade the pay­ment of Cana­dian in­come taxes for the years from 2005 to 2013.”

Mr. Tai could not be reached for com­ment on Fri­day. The Globe left a mes­sage re­quest­ing com­ment with some­one at Van­cou­ver-based NAI In­ter­ac­tive Ltd., a sub­sidiary of one of Mr. Tai’s com­pa­nies, who said he had re­layed the mes­sage to Mr. Tai and sev­eral other em­ploy­ees. Calls to home phone num­bers as­so­ci­ated with Mr. Tai and an­other man named in the court doc­u­ment were not re­turned.

Mr. Tai be­came a per­ma­nent res­i­dent of Canada in 1982, at the age of 18, and is now a Cana­dian cit­i­zen. Ac­cord­ing to the CRA, Mr. Tai was in­volved in cre­at­ing the fol­low­ing firms: Chi­ne­seWorldNet.Com Inc., a firm in­cor­po­rated in the Cay­man Is­lands in 2000 that con­nected “cap­i­tal mar­ket par­tic­i­pants in China with those in North Amer­ica” through a Chi­nese-lan­guage on­line por­tal that also of­fers fi­nan­cial news; CWN Cap­i­tal Inc., in­cor­po­rated in the Bri­tish Vir­gin Is­lands in 2009, and; Gold­pac In­vest­ment Part­ners Ltd., in­cor­po­rated in the Bri­tish Vir­gin Is­lands in 2001.

On Fri­day, a Globe re­porter vis­ited the down­town Van­cou­ver of­fices of Gold­pac and NAI In­ter- ac­tive and found their co-work­ing space empty. Two lights il­lu­mi­nated the of­fice, wires hung from above and a dozen ceil­ing pan­els were stacked at what used to be the front desk.

The doc­u­ment said the in­ves­ti­ga­tion started in 2013, when the CRA re­ceived in­for­ma­tion from the IRS based on data in the ICIJ’s “off­shore leaks data­base.” Ac­cord­ing to the court doc­u­ment, the IRS passed on e-mails to the CRA in which Mr. Tai dis­cussed the af­fairs of Gold­pac In­vest­ment Part­ners with a busi­ness as­so­ciate in Van­cou­ver.

The CRA search war­rant stated that Mr. Tai de­clared to­tal in­come of $549,000 on his T1 re­turns from 2005 to 2013. How­ever, the doc­u­ment al­leged that, in fact, Mr. Tai and his wife re­ceived $6.4mil­lion in in­come that they did not de­clare.

Ac­cord­ing to the CRA, CWN Cap­i­tal earned in­come of $4.8mil­lion be­tween 2010 and 2013. The money was di­rected to for­eign ac­counts, as CWN Cap­i­tal’s Cana­dian cus­tomers were in­structed to send their pay­ments to the firm’s bank ac­count in Hong Kong, the CRA al­leged.

About $4-mil­lion was trans­ferred to Cana­dian bank ac­counts “to re­mu­ner­ate Joe Tai, and per­sons work­ing for him in Van­cou­ver, Canada, or oth­er­wise used for stock trad­ing,” the CRA al­leged.

The Lib­eral gov­ern­ment an­nounced last year that it would spend an ad­di­tional $444-mil­lion to crack down on tax eva­sion and tax avoid­ance. The CRA is au­dit­ing 820 tax­pay­ers and crim­i­nally in­ves­ti­gat­ing 20 cases of tax eva­sion in re­la­tion to off­shore files.

“From April 1, 2011, to March 31, 2016, the CRA has con­victed 42 tax­pay­ers with off­shore links for tax eva­sion, in­volv­ing $34 mil­lion in fed­eral taxes evaded, court fines of $12 mil­lion, and 734 months of jail time,” the CRA said in its state­ment.

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