OTTAWA – The Canada Revenue Agency has 80 new leads on taxpayers who may be hiding money offshore after getting hundreds of calls on its new snitch line.
The flush of information has even the agency’s harshest critics acknowledging the initial success of the hotline, established Jan. 15 to help ferret out billions of dollars stashed overseas.
The so-called OTIP line – for Offshore Tax Informant Program – was promised in the March 2013 budget but took 10 months to set up.
As of May 31, more than 800 people rang the number, drawn by a cash reward system that gives the tipster up to 15 per cent of the amount in taxes that the agency eventually collects.
Only 251 of those calls were actual informants, and only 100 went to the next required step, filing a written submission identifying themselves and providing detailed information on the alleged overseas tax evasion.
The agency closed 20 of those written files as dead ends, but is pursuing the remainder.
Details of the program’s first few months were obtained under the Access to Information Act, supplemented by information provided directly by the Canada Revenue Agency.
“I’ve been surprised, pleasantly surprised,” said Jonathan Garbutt, a Toronto tax lawyer who has been a vocal critic of the way the program was established.
“I’m not … as pessimistic as I was,” he said in an interview, adding that at least two of the tipsters have become his clients, and other potential offshore whistleblowers are consulting him.
The program is modelled on a U.S. counterpart that is much more generous, offering rewards as high as 30 per cent, for example. The Internal Revenue Service paid out US$104 million to one snitch after collecting US$5 billion in back taxes from Swiss banks.
The Canadian program pays between five and 15 per cent only if the CRA successfully collects more than $100,000 in taxes owed, and the tipster must pay income tax on the reward. Some classes of informants are excluded, including most public servants or criminals.
The snitch must also reveal his or her identity, unlike another snitch line at the CRA, which is focused on domestic tax fraud and pays no rewards.
Sen. Percy Downe, long a critic of the agency’s efforts to collect on money hidden offshore, said he welcomes the initiative.
“I’m glad it’s finally up and running,” he said in an interview from Charlottetown.
But the reward level should match the American program, he said, and massive job cuts at the CRA raise doubts about whether it can properly pursue the leads.
“The department fails to put the resources into fighting overseas tax evasion and this is another example of it, rather than doing 30 per cent (rewards) they’re doing 15 per cent.”
Garbutt also praised the American system, which generally requires tipsters to have legal counsel to help the IRS winnow out the soft leads. “They only see wheat, they don’t see chaff,” he said.
Garbutt also raised questions about diminishing resources at the agency, which has shed more than 2,500 jobs in recent years.
“They don’t seem to be overwhelmed yet, but I think they could probably get there pretty quick.”
The snitch program, with an annual budget of about $700,000, has not paid out any rewards to date.
“It may take several years from the date of entering into a contract with the CRA until the additional federal tax is assessed,” said agency spokesman Philippe Brideau.
“The CRA believes this is a good start to the program. … The early call and submission statistics indicate that there is interest on the part of informants to participate in this program.”
© The Canadian Press, 2014