FEDERAL BUDGET TAKES AIM AT FINANCIAL CRIMES.

Move to expose shell companies ‘game-changing’

OTTAWA • The federal budget introduces a series of initiatives to combat tax and financial crimes that experts say range from “gamechanging” to “extremely modest” and “late to the game.”

They include a public registry of corporate ownership, hundreds of millions of dollars in additional funding to the Canada Revenue Agency and an end to cross-border tax schemes, but no sweeping tax reforms in the Liberals’ 2021 budget.

The biggest decision for most experts consulted by National Post was the government’s “unexpected” commitment to creating a public corporate beneficial ownership registry by 2025, which is essentially a database of who the real owners are of any private corporation.

In other words, it allows law enforcement and other authorities to see who is behind any organization, particularly shell corporations.

“This has got to be a game changer, not just for law enforcement, but also for risk management for companies who want to know who they’re doing business with and avoid working with organized crime, for example,” said Denis Meunier, an anti-money laundering consultant and former director general responsible for criminal investigations at the CRA.

For advocacy group Transparency international, the measure will particularly help the government combat the plague of shell corporations being used in money laundering and tax fraud schemes.

“Canada has a notorious reputation as a country where it is easy to hide dirty money and fund illegal activity from abroad, known as ‘snow-washing,’ ” Transparency International said in a statement.

The budget also promises to stamp out a scheme used by multinational enterprises to pay less taxes by exploiting cross-border legal loopholes and beef up laws and penalties around those who use or promote abusive tax avoidance tools.

The budget also pledges to stop companies and rich Canadians from “inappropriately shifting profits offshore and using other international tax avoidance schemes.”

In that same section, the government comes clean with the fact that federal legislation has unsurprisingly not kept up with the rapidly evolving world of tax fraud.

“This project has shown that stronger rules are needed to strengthen the Canada Revenue Agency’s ability to curtail tax evasion and aggressive tax avoidance in both the domestic and international context,” reads the document.

The government is investing $304.1 million over five years to help the CRA bolster is ability to crack down on “complex tax schemes” and another $230 million by 2027 to help improve tax collections capability.

Each investment is expected to return $810 million and $5 billion respectively to government coffers over the next five years in unpaid taxes.

“The success of the CRA’S work in combating aggressive tax planning, the underground economy, and tax evasion depends on the CRA’S ability to collect outstanding taxes in a timely way,” reads the budget.

For both Toby Sanger of Canadians for Tax Fairness and Arthur Cockfield, Queen’s Law associate dean and a renowned tax law expert, the measures amount to closing small loopholes that the government has known about for years.

“Overall, the changes are extremely modest compared to what U.S. President Joe Biden is proposing and compared to some of the measures that we’ve also seen in the U.K.,” Sanger said. “Canada is definitely late to the game on a lot of this, but I do have to pat them on the back for finally doing it.”

Cockfield said the government is moving in the right direction, albeit many of those measures are just regular “housekeeping” to close well-known tax loopholes.

And in addition to announcing new funding for the CRA, he wishes that the government would report the results of the extra resources every year.

“I would encourage the government to publicly disclose its success, or lack thereof, with respect to inhibiting tax evasion and tax avoidance,” Cockfield said.

“I would like to see specifically the amount of offshore tax evasion prosecutions that have been successful or not. And exactly how much money have we recovered by going after these offshore tax cheats?”

CANADA HAS A NOTORIOUS REPUTATION AS A COUNTRY WHERE IT IS EASY TO HIDE DIRTY MONEY.